The AA is launching an innovative car insurance policy called Drivesafe which could help younger drivers save up to £850 a year.

Younger drivers already pay substantially higher premiums than other motorists and these costs are increasing.

A new study by Confused.com suggests insurance costs for younger driver have gone up by 5.7 per cent in a year.

Young males are the most heavily penalised, with the average insurance quote for a male driver aged between 17 and 20 totalling £3,730, while a female driver in the same age group would pay £1,959.

With premiums at this high level, the AA’s latest policy is likely to be welcomed, even though it requires the driver’s performance to be monitored.

Under the Drivesafe scheme a black box device is fitted to the policy holder’s car to monitor a range of driving skills and conditions including speed, braking severity, cornering and the types of roads used during certain times of day.

The system relays the data it collects to the insurer and the driver can check their performance online.

They will also be warned by email if they are driving dangerously.

Although the information could be used as evidence in the case of an accident, it will only be revealed if a court order is presented.

Similar black box technology is already being used by the Co-Op and Coverbox and Direct Line is planning to launch a similar system shortly.

Insurance broker Motaquote today revealed a partnership with sat-nav manufacturer TomTom which will allow drivers to check their performance in real time via an online dashboard.

Simon Douglas, director of AA Insurance said: “Most people can improve their driving standard and Drivesafe can help them to do that.

“I believe that in time, systems of this type will become increasingly widely used by drivers of all ages,” he continued.”

ATOL, a financial protection scheme managed by the Civil Aviation Authority, is being extended to protect up to six million more holidays a year.

The scheme ensures that holiday makers do not lose out financially if a travel company collapses, and that they are not stranded abroad.

An increase in the number of holidays booked online and of flight-only trips has meant that many holidays are not covered by the ATOL scheme.

From 30 April 2012 “flight-plus” holidays, which are not currently covered by ATOL, will come under the scheme’s protection.

These are holidays comprising a number of elements, including a flight, where the different elements were bought within specified period of time.

The reforms also mean that passengers will be given a certificate when they purchase their holiday, clearly stating whether their trip is protected by ATOL or not.

Further changes could be introduced under the Civil Aviation Bill currently going through Parliament, including bringing holidays sold by airlines, and holidays arranged on an “agent for the consumer” basis under the scheme’s protection.

The fund which covers ATOL’s payouts to holiday makers is running at a deficit and it is hoped that the reforms will strengthen its financial position.

Travel organisation Abta has warned that the reforms could lead to rising prices for holidaymakers.

In related news AA Travel Insurance revealed that nearly one fifth of travellers do not take out insurance for their winter holiday, even though winter sports such as skiing pose considerable risks.

Eighteen per cent of respondents to an AA/Populus study of 2,000 AA members who are taking a winter holiday said they don’t bother to buy travel insurance.

Only 34 per cent of those who do buy insurance make sure that the cover is adequate for their needs.

Alan Purvis, director of AA Travel Insurance, said: “More than a million people go on a snow holiday every winter so potentially, up to 200,000 are uninsured”.

Emergency household repairs company Homeserve is taking longer than expected to get back on track after its operations were suspended last October.

The company expected customer numbers to fall by 5% this year but it has increased this estimate to 8% and announced the loss of 200 jobs.

It estimates that renewal revenue in 2013 will be around £10 million lower, while adjusted pretax profit for the year to 31 March 2012 is expected be in line with market expectations of £127 million.

Homeserve, which calls itself “Britain’s fifth emergency service”, provides insurance cover against domestic emergencies such as burst pipes and boiler breakdowns.

It was unable to deal with the high volume of requests for boiler repairs during last year’s severe winter weather and a subsequent audit of its sales techniques by Deloitte revealed issues with standards and raised concern that it could be mis-selling products.

This led to Homeserve suspending it operations in order to retrain staff and overhaul its marketing techniques, but this is taking longer to complete than expected and costing significantly more than anticipated.

The company has restarted taking inbound calls in all but one region and has re-launched its mail marketing campaign.

Earlier this year Homeserve promoted its group chief financial officer, Martin Bennett, to the new position of group chief operating officer.

His new role gives him responsibility for best practice and risk management.

David Bower, HomeServe’s Financial Director is covering the interim CFO role while a permanent replacement is recruited.

Homeserve, which was created as a joint venture with South Staffordshire Water in 1993, operates in the US, France, Spain and Belgium as well as in the UK.

It has issued more than 10 million policies to 4.5 million customers.

South Staffordshire Water plc demerged from the group in 2004.

Travellers whose flights were disrupted by the Icelandic volcanic eruption in 2010 can now go ahead with insurance claims.

Following the eruption of the Eyjafjallajökull volcano in April and May 2010, the Financial Ombudsman Service (FOS) ruled that the resulting volcanic ash cloud, which led to airspace being closed, could be considered a “poor weather condition” for insurance purposes.

However insurance provider Europ Assistance launched a legal challenge to the ombudsman’s ruling and the claims of 300 of its customers were put on hold.

The challenge has now rejected by the High Court and Europ Assistance has confirmed that it will handle complaints in line with the FOS’s ruling and will not pursue any further legal action.

The volcanic eruptions led to the disruption of around 100,000 flights and 10 million passenger journeys.

In related news, a report by Money Mail suggests that insurance companies are trying to recoup the losses they incurred as a result of recent events such as the volcanic eruptions and are therefore pushing up the price of policies.

The report suggests that this is leading to people over the age of 65 paying substantially more for their travel insurance than younger travellers.

Some High Street insurance companies are charging older people as much as £361 for an annual travel policy that would cost a younger person £163.

Michelle Mitchell, charity director of Age UK, said: ‘These figures confirm our worst fears that older people will be forced to risk travelling without protection or forgo holidays abroad altogether because they can’t afford insurance.’

A survey carried out by eDigital Research on behalf of Asda Financial Services found that a third of people in the UK do not have travel insurance in place and over 10 per cent travel abroad without taking out insurance.

The Association of British Insurers has warned that time is running out to ensure that UK home owners in areas at risk of flooding can afford to insure their properties in the future.

A voluntary flood agreement between the government and the insurance industry expires in June 2013.

Under the current agreement, which started in 2000, insurers are required to provide flood cover as standard for properties built before 1 January 2009, where the risk of flooding is low.

They must also allow households in higher risk areas to automatically renew their cover with the same insurer, as long as there are plans in place to build flood defences within five years.

Unless this agreement is extended around 200,000 homes at risk from flooding may find it difficult to insure their properties.

Households in Boston and Skegness, and the Vale of Clwyd face the greatest risks, according to research carried out by the Association of British Insurers (ABI).

ABI’s director-general Otto Thoresen said: “”We are frustrated with the progress of our talks with the Government on this issue and want it to look urgently at a model that would allow flood cover to remain widely available and competitively priced.

“No country in the world has an entirely free market providing universal affordable flood insurance, and action is needed now to avoid 200,000 high-risk homes struggling to afford cover.”

Government agencies are unable to agree over who is responsible for flood defences, with the Department for Environment, Food and Rural Affairs (Defra) claiming that it shares the responsibility with the Environment Agency and local bodies.

However no structure is in place to alert Defra when local flood management is adequate and it needs to take action.

Environment Secretary Caroline Spelman said: “We want flood insurance to remain widely available and as part of these discussions, over the next few months we are looking at feasible, value for money ways of targeting funding support to those most in need.”

The Environment Department has published a report suggesting that flooding is the worst climate change threat facing the UK.

Up to 3.6 million people in the UK are at risk by the middle of the century and the cost of damage caused by flooding could increase to between £2 billion and £10 billion a year by 2080.

Compensation paid to consumers who were mis-sold Payment Protection Insurance (PPI) reached a record £379m in November, compared with £268m in October.

PPI was routinely sold alongside loans to protect re-payments if the customer fell ill or became unemployed, but many people were sold policies that were invalid because they did not meet the qualifying criteria.

Lenders were under commission for every PPI policy they sold which led to some salespeople misleading customers by telling them that the loan would not be authorised unless PPI was taken out.

Millions of consumers were mis-sold PPI and it is estimated that up to £9bn will be paid out in compensation.

The number of PPI complaints received by the Financial Ombudsman Service (FOS) increased by 10 per cent to 55,907 in the final three months of 2011, compared with the previous quarter.

In November the Financial Services Authority (FSA) and the Office of Fair Trading (OFT) launched a joint consultation on how to prevent the problems associated with PPI being repeated in the replacement products being brought to market.

The consultation closed on 13 January 2012 and specialist Lloyd’s insurer, Jubilee, is pressing for the two agencies to provide regulatory certainty in order to allow the PPI market to grow.

Jubilee’s head of personal lines, Chris Biles, said: “Anything which helps to clarify the responsibilities of both distributor and insurer has to be welcomed.

“But the FSA and OFT must recognise that there is a clear role for both lenders and insurers in helping to ensure that borrowers have access to appropriate ways of reducing the risk of being unable to maintain financial commitments.

“The key will be that any solution is designed to be easily understood and matched to the specific needs of the customer.”

Car insurance premiums increased in 2011, despite a fall in the third quarter of the year, the AA reports.

Based on its ‘Shoparound’ price index, which takes the average of the three cheapest quotes from several insurance providers, the AA says that premiums have increased by 15.3% compared with a year ago.

The average comprehensive cover has increased by 5.4 per cent to £971.40, compared with £921.38 in October 2011.

However in Scotland the shop around premium for comprehensive cover is £587, making it the cheapest place in Britain for car insurance.

In contrast, the average premium in north-west England is £1,615, which is even more expensive than London where the average premium is £1,120.

Young drivers are worst affected by the price increase and some insurers have stopped insuring drivers under the age of 21 altogether.

Premiums for young male drivers under the age of 22 increased by 15 per cent to £3,163 in 2011, compared with 2010.

Earlier this month the AA welcomed a report by the House of Commons Transport Committee into the rising cost car insurance.

The report suggested that car insurance premiums are being driven up by the compensation culture in which the number of personal injury claims has soared.

MPs are calling for motorists to have to face medical tests to prove that an accident has caused whiplash injuries.

Simon Douglas, director of AA Insurances said: “A claims culture has developed to the extent that it has become accepted that if another vehicle hits your car, you should make an injury claim.

“That’s regardless of how serious the injury is, or even if no injury has actually been suffered.

“The Transport Committee has clearly recognised that this has driven up premiums for everyone.”

Insurance firms Direct Line and Churchill have been fined for making alterations to files before submitting them to the Financial Services Authority (FSA).

In 2010 the regulator asked for 50 files to be submitted so that it could assess how the firms handled customers’ complaints.

The request was part of an ongoing inquiry by the FSA into financial firms’ complaint procedures.

Before the files were submitted, managers at both Direct Line and Churchill appointed external accountants to review a sample of complaints, and were advised that 28% were not likely meet the FSA’s required standard.

The two companies therefore instructed staff to check that the closed complaints were completed properly but this led to inappropriate alterations being made.

It was discovered that one employee had forged the signatures of colleagues in an effort to improve the data.

Although the changes were found to be minor and were not to the detriment of customers, the FSA imposed a £2.17m fine on the firms.

Tracey McDermott of the FSA said: “The firms’ management did not know what changes had been made or when [but] it is of critical importance that material provided to the FSA must reflect the picture as it is – not as they might like it to be.”

Paul Geddes, CEO, RBS Insurance said: “We very much regret the findings of the FSA investigation”.

RBS Insurance, which includes Green Flag and Privilege brands as well as Direct Line and Churchill, is being sold by RBS under European regulations.

Earlier this month the company appointed Rick Vlemmiks as chief marketing officer to oversee the restructuring of its insurance brands in order to strengthen their individual identities.

Mr Vlemmiks was formerly commercial director at British Gas.

Complaints to the Financial Ombudsman Service (FOS) from consumers who were mis-sold payment protection insurance (PPI), increased by 57 per cent to 30,301 between October and December 2010, compared with the previous three months.

PPI complaints now make up 54% of the FOS’s workload.

The FOS, which only deals with PPI complaints that financial firms have failed to resolve, ruled in favour of the customer in 68 per cent of the cases it dealt with in the final three months of 2011.

This is a significant fall from between July and September 2011, when it ruled in favour of the customer in 92 per cent of cases.

Millions of PPI policies were routinely sold with mortgages, loans and credit cards from the 1990s.

The insurance is designed to meet credit payments if the policy holder is unable to pay due to illness or unemployment, but millions of people were sold policies that were invalid because they did not fulfil the qualifying criteria.

Some policies were sold to people who did not need them and many people did not realise that the insurance was optional.

For years the banking industry refused to admit that PPI had been mis-sold, but was forced in May 2011 to adhere to the Financial Services Authority’s (FSA’s) demand that past sales of the policies should be reviewed.

The FSA also said that future sales of PPI should be much more strictly regulated.

Earlier this month the FOS said it was disappointed at the number of customers still waiting for financial companies to deal with their PPI complaints.

It is considering introducing a fee of £350 for dealing with PPI cases, which firms would have to pay in addition to a £500 standard case fee.

Car insurance costs are spiralling and claims for whiplash injuries are one of the main causes, according to a new report by MPs, launched today.

Although the number of road accident casualties has fallen by 23 per cent in the past six years, the number of motor insurance injury claims has grown by 70 per cent.

The Transport Select Committee wants people submitting whiplash claims to be required to provide much more extensive proof that they have suffered this type of injury and it also wants the government to impose a higher threshold for compensation payouts.

The Committee warned that referral fees are also pushing up the cost of premiums and it is calling for insurers to be banned from selling customer information.

Insurance companies receive referral fees from solicitors, garages and car hire firms in return for accident details including drivers’ personal data.

Louise Ellman, chair of the Transport Committee, said: “Although we strongly support access to justice, drivers should not be railroaded by cold callers into launching legal action”.

The Committee suggests that the Government should establish a cross-departmental ministerial committee to investigate how the cost of motor insurance can be reduced.

The report was supported by motoring organisations, including the AA.

Simon Douglas, director of AA Insurance, said: “We must kill the compensation culture that has sharply driven up car insurance premiums. The recommendations from the committee are a positive step towards doing that.”

Meanwhile, drivers are being warned that online insurance company, Aston Midshires, is under investigation by Police, Trading Standards and the Financial Services Authority after it allegedly sold invalid motor insurance policies.

The investigation was launched following thirty complaints from drivers who purchased insurance from the firm but found it not to be valid.