The AA has dismissed claims made by market analysis company Datamonitor that the motor industry could make a profit in 2009.

Datamonitor has predicted that UK private motor insurance market will see premium revenue outstripping that of claims costs in 2009. If the predictions are right it will be the first time for 14 years that such a situation has occurred for the industry.

However, motor insurance broker AA said the cost of claims is showing no signs of slowing.

Andrew Strong, chief executive of AA Insurance, said: “In order to reach profitability by 2009, premiums will have to rise by at least 20 per cent over the next two years.”

Mr Strong added personal injury claims continue to increase by ten per cent every year as accident victims “are more willing to make such claims these days”.

Datamonitor financial services analyst, Andrew Haslip, said: “The main drivers in motor claims’ inflation remain personal injury costs.”

With the stiff competition between car insurers, customers are more willing and bale to shop around for the best deal. The number one criteria for choosing a motor insurance policy was price in 2007. And so in such a highly competitive environment car insurance companies are unable to raise their premiums to coincide with rising claim costs in a bid to attract customers.