It's hardly a closely guarded secret that the country is in a true state of economic uncertainty and that the UK is potentially heading towards an financial crisis, but how will this effect motorists and the ever increasing cost of the car insurance premiums that they have to shell out for?

Both the Prime Minister and the Governor of the Bank of England have admitted that the UK was heading towards recession and the short term solution to this has been to cut interest rates and reduce the stringency of borrowing conditions faced by small businesses. However, the long term effectiveness of this strategy still remains to be seen and these temporary measures are considered by many to be something of a risky bet.

One thing that is for certain is that we are now in the position of facing a very real economic crisis and this can also be seen in terms of rising insurance costs as far as everyday motorists are concerned. The average increase on car insurance premiums which British drivers are having to pay is around 7.5% and this is set to rise even further as the threat of economic uncertainty begins to loom even larger.

Although the credit crunch itself is something of a contributing factor towards our rising car insurance costs, there are also several other factors which are to blame. At the very top of this list is the number of personal injury claims which people are making for traffic related accidents. If the current trend persists it is estimated that car insurance companies will end up paying out several times the amount of income they collect in premiums and this will inevitably have to be paid for by the average motorist.

In fact it has been suggested that the average amount paid out by insurance companies when underwriting claims is somewhere in the region of £105 for every £100 they make from their customers. This is also due to the legal costs involved with personal injury claims which have risen by 22% in the last year alone!

To make matters worse we are now experiencing more floods than ever due to climate change. This too is a real threat as most vehicles aren't built to withstand flood conditions and high water levels can cause an overwhelming amount of damage to both the engine and the bodywork of a car. Damage which has to be paid for by insurance companies and those with insurance policies.

As car owners and insurance policy holders, the best thing we can do in order to keep premiums as realistically low as possible is to minimise the risk of endangering our vehicles by ensuring they are kept away from hazardous environments whenever we can.