Car insurance fraud
The warning comes in spite of a 1% drop in the last quarter

Improvements in fraud detection have sent the cost of car insurance in the UK tumbling, according to the insurance arm of the Automobile Association (AA).

The average annual comprehensive car insurance quote has dropped to £594.84 (€689.38, $915.32) this month from £659.53 in July last year, a 9.8% fall. This is the biggest fall since the inception of the AA Insurance index in 1994. Premiums, however, remain higher than six years ago.

Insurers previously faced "a fast-widening gap between premium income and claims costs - largely driven by whiplash injury claims and fraud, which saw very sharp premium increases between 2009 and 2011.

"That gap is closing and premiums are falling again thanks to competition, as well as improved fraud detection by the insurance industry and tightening of the law that is beginning to curb the number of spurious new whiplash injury claims," AA Insurance director Simon Douglas said.

Between April and July this year, the AA report said, the cost of comprehensive insurance had fallen by 3% and third party - the legal minimum - by 2.2%.

Improved Measures

At the beginning of April, a ban on referral fees was introduced. Measures were taken to obtain correct information about accident victims. In addition, anyone claiming accident damages with the help of a no-win, no-fee lawyer now has to pay their lawyer's fee from their own funds if they win their case.

Furthermore, new gender equality laws have forced down the cost of insurance for men by far more than expected, while women's premiums have remained stable. Fake claims, especially for whiplash, are also down.

"Uninsured driving costs the industry £500m, whiplash claims £2bn and fraud £1bn," Graeme Trudgill of the British Insurance Brokers' Association told the BBC. But these costs were now coming down, he added, because of a concerted effort by the industry, with "discounts now feeding through to policy holders".

The city regulator, the Financial Conduct Authority, this month launched a probe into insurance companies overcharging customers for car and house policy renewals. The regulator said that automatic policy renewal can lead to customers being treated unfairly.