A consumer watchdog is to investigate claims that motor insurance premiums have gone up by around 40 per cent. The Office of Fair Trading said that if this was the case then it would be trying to find out why. The body also wants to examine issues which could have an impact on competition. The OFT plans to collect evidence from insurers, and other participants within the industry such as price comparison websites, over the coming five weeks.

The results will be available in December after which the OFT will decide whether to take the matter further. According to the AA, in the 12 months to April this year, the price of insuring a vehicle had increased by 40 per cent.

Consumer Council for Northern Ireland director, Aodhan O’Donnell, said that in the past two years the price of insurance in Northern Ireland has shot up by 70 per cent. He added that the costs were even steeper for young drivers.

Association of British Insurers director general, Otto Thoresen, said the industry was committed to making sure that insurance policies were kept as competitive as possible. He added that there would however need to be major reforms to the system if there was ever going to be a reduction in prices.

Thoresen explained that a number of factors in recent years including low investment returns, uninsured drivers, insurance fraud, legal costs and an increase in personal injury claims meant that the price of insuring a vehicle has inevitably been driven up.