The cost of insuring a car may begin creeping upwards again, reports Caroline Madden.

In recent years, consumers have had to accept the spiralling cost of living in Ireland - food prices seem to rise with each weekly grocery shop, utility bills increase almost by the month, and energy price hikes are a regular occurrence.

For consumers, the steady fall in the cost of motor insurance premiums over the last few years provided a little solace. But now it seems that even the cost of insuring a car may begin creeping upwards again.

Over the last four years, average motor insurance premiums have fallen by 40-50 per cent. This is largely to due to the establishment of the Personal Injuries Assessment Board (PIAB) in 2003, which has been very effective in reducing insurers' claim costs.

In addition, the rolling out of a number of Government initiatives - such as random breath testing - led to an improvement in the road safety environment.

Although the number of damage claims relating to minor accidents has risen due to increased traffic congestion, the number of serious injury claims has fallen.

This has reduced claim costs even further, which in turn has translated into lower premiums.

The final factor driving premiums down was the aggressive competition that sprang up in the motor insurance market. Very strong profits reported in the industry in 2003-2006 attracted a few new players into the market, but more importantly, it sparked fierce competition between existing insurers which all began jostling for a larger slice of the cake.

However, profitability in the motor insurance market is no longer quite as astronomical as in the past.

The relentless squeeze on premiums has trimmed much of the fat off insurance company profits and costs are on the increase, in part because the return to an increasing trend in serious road accidents.

All this puts pressure on the sector's underwriting performance. In fact margins are being squeezed, and certain members of the industry are predicting that it will not be possible to cut premiums any further.

The Deloitte motor insurance survey, which was completed last month by representatives from 90 per cent of the motor insurance companies in Ireland, revealed that 40 per cent of respondents believe that premiums will increase by up to 10 per cent in 2008.

Opinions are split, however, with an equal number predicting that premiums could fall further.

Dick O'Driscoll, managing director of Hibernian General Insurance, believes premium increases are on the horizon, and predicts that they will probably be in line with inflation.

"Rates have reduced very significantly over the last four years and it is inevitable that rates will begin to increase," O'Driscoll says.

"The fierce competition that we've seen, over the last 18 months in particular, has resulted in a delay in the return to modest price increases."

The lead time required to implement price changes would suggest that any such increases would not hit consumers until 2008.

However, Deloitte, which held its third annual motor insurance seminar last month, has suggested that market pressures will prevent any price hikes, however modest.

"We believe that motor insurance companies will come under pressure to decrease premiums," commented Glenn Gillard, Deloitte's financial service partner.

"As the general public become more sympathetic with road safety measures and the PIAB continues to have a positive impact on compensation culture, there will be very little justification for increased premiums."

Whether or not premiums do increase next year, consumers will still be able to make considerable savings by simply shopping around for the most competitive quote.

Increasingly, motor insurance customers are going online to make enquiries and get a range of quotes, but the majority still prefer the human touch when actually taking out a policy. As a result, call centres and branches are favoured at this point.

Brokers remain a very big element of the motor insurance market, and going down this route offers several advantages. The broker will do all the legwork on the customer's behalf, and may also be able to access discounts due to the volume of business they handle.

Drivers whose policies are coming up for renewal should shop around for a cheaper quote as they can use this as a bargaining tool with their existing insurer, who may very well match, or even beat, the quote in order to keep their business.

Consumers should also check whether they are part of a group insurance scheme through their work, which may entitle them to a discount.

There are many ways of further reducing the cost of car insurance, such as switching to a lower value car or one with a smaller engine, getting an alarm and immobiliser fitted, or keeping the car in a garage.

Parents with teenage children should also investigate Hibernian's new driving school. One of the benefits offered is that children of motorists with a Hibernian policy can get "accompanied driver cover" free of charge for six months, once they sign up for 10 lessons with the driving school.

Given the recent confusion over the change in the rules that apply to learner drivers, parents and their children may be wondering about the insurance status of provisional licence holders if driving unaccompanied. The Irish Insurance Federation clarified the situation last month.

"Contrary to some suggestions, provisional licence holders will continue to enjoy full insurance cover after the new licence rules come into force," chief executive Michael Kemp stated.

"Under the new licence rules, and subject to a further review of the situation, if a provisional licence-holder is at fault in a crash while driving unaccompanied, claims will continue to be handled by his insurer as normal," he added.

When shopping around for car insurance, drivers may find themselves tempted to keep certain unsavoury information to themselves, (such as a large number of penalty points racked up, or previous crashes the person has been involved in), in order to secure a cheaper premium. But in the long run this could come back to haunt them.

The omission of relevant information can invalidate an insurance policy, although, according to one industry source, even if a driver has made a "material non-disclosure" to their insurer and is then injured in an accident, in practice the insurer will still pay out.

However, if the individual's vehicle is damaged, the insurer is unlikely to pay for the resulting costs.

A common repercussion is that the customer finds themselves being penalised after the incident, as they may find it very difficult to get reasonable terms from any insurance provider when it becomes clear that they have been deliberately misleading their existing insurer.

So even if premiums begin to inch upwards and the temptation to skimp with the truth mounts, in the long run it pays for consumers to come clean about those nasty blemishes on their driving record.