The average quote for an annual comprehensive car insurance policy fell by £568.32 or 12.4% over the 12 months ending 30 September, the biggest annual drop in premiums since the AA British Insurance Premium Index started in 1994.

It said competition had forced the record drop in premiums.

Young and old drivers have seen the smallest premium reductions overall, with average falls of 4.6% (to £1,198.96) and 4.8% (to £413.11) respectively over the past 12 months..

However, young women renewing their policies after their first year’s driving can expect to see premium increases which more than cancel out their first year’s no-claim bonus, thanks to last December’s European Court of Justice gender ruling.

Conversely, young men with a clean license and no claims will see much larger premium falls.

New whiplash controls

Justice Minister Chris Grayling has announced a further crackdown on whiplash injury fraud.

He said that bogus compensation claims that have helped to force up average motor insurance premiums will be targeted by new independent medical panels which will ensure only evidence from accredited professionals can be considered.

This is expected to curb the number of people that profit from exaggerated or fraudulent compensation claims, but highlighted that victims with genuine cases can still get the help they deserve.

These will be introduced from next year.

Simon Douglas, director of AA Insurance, said:”The insurance industry is working hard with enforcement agencies to bring those attempting to make fraudulent injury claims to book. Indeed, there have been some recent widely-publicised arrests of criminal gangs deliberately causing crashes through ‘crash for cash’ and its new variation, ‘flash for cash’ scams in order to cash in on insurers by making false whiplash injury claims against innocent motorists.

“Honest motorists have been putting up with their premiums being affected by false or exaggerated injury claims for far too long.

“There has been a lot of talking and investigation into the car insurance market. Now premiums are reflecting anticipated law changes.”

Douglas added that without further reforms to deal with excessive whiplash claims, the reductions seen will not be justified by changes in the cost of claims.

In a separate move, next year insurers will be able to obtain driver data direct from the DVLA and most insurers are expected to start asking drivers for their driver number.

This is expected to help to stamp out false declarations of driving experience and driving convictions.

The AA said this may bring savings of around £15 on the cost of a typical car insurance policy.