Car insurance premiums are forecast to soar by 12 per cent over the year, the AA has warned.

Spiralling costs for insurers – particularly for personal injury claims – pushed the cost of motor insurance up by around 8.7 per cent over 2008 to an average of £741.66, the AA has found.

For drivers prepared to shop around and check at least three different quotes, the cost of cover rose by the lower figure of 7.2 per cent to £618.91.

However, the pace of the rises is expected to increase over 2009 and the AA expects the average quoted premium to rise by between ten and 12 per cent.

Simon Douglas, director of AA Insurance, said: “Although the bank base rate has fallen and there is widespread price-cutting across credit-crunch Britain, the costs insurers face are rising fast.

“Personal injury claims and their associated legal expenses rose by around 22 per cent last year to about £6.16 billion and are expected to hit £10.9 billion by 2012.

“Whiplash injury alone represents around £66 for every car insurance policy sold. In addition, detected insurance fraud rose by around 17 per cent during 2008.”

However – if you are prepared to shop around – the price of home insurance has actually fallen this year, the AA added.

Taking an average of the lowest three premiums for each risk category, home insurance premiums fell by 0.7 per cent to £122.77 over 2008.

Premiums for customers shopping around for combined home and contents insurance fell by 1.1 per cent.

The figures reflect the competitive nature of the car insurance industry, the AA said.