Car and home insurance premiums remained relatively static over the first quarter of the year, according to new research

Car and home insurance premiums remained relatively static over the first quarter of the year, according to new research.

AA's latest British Insurance Premium Index states that the average cost of car insurance fell very slightly in the first three months of 2007, following last year's record highs.

The index, which has been tracking average premiums since 1994, found that typical comprehensive car insurance quotes hit a high of £806 at the end of 2006.

This followed a 4.35 per cent increase during the last quarter of the year. However, average prices for policies in the first quarter of 2007 fell slightly by £4 to £802.

Commentators suggest that this marks an end to the upward trajectory of car insurance premiums over the past 12 months, with average third-party, fire and theft policies also falling to £933.

Kevin Sinclair, managing director of AA Insurance, commented: "I had expected premiums to continue rising and I think the underlying pressure is still upward. Most insurers continued to apply small increases in an effort to close the gap between premium income and claims costs.

"Some distributors especially online providers are taking advantage of the rising trend to offer big introductory discounts and that has checked premium averages. But there is a limit to how long they can hold back the tide."

On the subject of third-party, fire and theft premiums, he continued that these are mostly bought by younger drivers and that their upward trend is likely to continue since "under 21-year-olds are five times more likely than those aged 35-plus to have an accident".

Mr Sinclair added that further rises in average insurance premiums are likely to occur over the course of the coming year.

The relatively modest decline in premiums comes despite a rise in new car registrations, with figures up year-on-year by 3.1 per cent, according to the Society of Motor Manufacturing Traders (SMMT).

It states that demand was high for diesel cars, which represented 99.5 per cent of the total volume increase in March. Supermini cars were also responsible for a rise in car demand, suggested that "fuel efficiency and greener motoring are now critical concerns for buyers," in the eyes of SMMT chief executive Christopher Macgowan.

Despite this, environmental issues had little impact on the cost of house insurance premiums, according to the British Insurance Premium Index, thought experts suggest that this may not remain the case.

Home buildings insurance premiums increased by 0.78 per cent to £210.66 over the previous quarter and home contents insurance premiums also rose marginally by 1.26 per cent.

However, both fell by 1.23 per cent and 1.78 per cent respectively in comparison with prices for last year, with a mild winter leading to fewer claims for damages such as burst water pipes.

Kevin Sinclair said that "it will take several significant weather events to cause sustained premium increases".

He added: "Insurers are concerned about the long-term effects of climate change but it seems that in the short term mild winters are keeping claims and thus premiums relatively low. I'm starting to wonder have we have found one of the few positive impacts of global warming?"