The latest pressure comes from last month's Budget which saw an increase in insurance premium tax of 1%. However, in the last few months warnings have been issued of premium pressures from other sources. The imminent introduction of the Road Traffic (NHS Charges) Bill on the statute books looks set to increase premiums by up to 20%. Insurance companies are also looking to make up for losses totalling £1.1 billion in the motor sector - including £600 million in the fleet sector - in 1997 due to companies offering rock bottom rates to win business.
Insurance companies are also being put under growing pressure by the bodyshop industry which feels it has been put under unfair pressure as insurers attempt to keep premiums as low as possible by dictating repair terms. Steve Rattle, managing director of VELO Motor Accident Management, said: 'For some time there has been a large number of insurers offering cheap motor policy rates. This is not sustainable -as has been seen by the number of insurance companies disappearing or merging. It seems the bubble has burst and that policy rates will harden throughout the year.'