The premiums of car insurance were reported declined unexpectedly by 3.2% in the first quarter of the year, according to the latest AA British Insurance Premium Index.

The decline in the first quarter surprised the market as it came after a decent growth of 18.7% reported in the year 2009. However, the AA British Insurance Premium Index showed that the lowest premium price for such a policy was actually reported up in the first quarter ended March.

The AA British Insurance Premium Index showed that the average quoted premium for a comprehensive car insurance policy for the first quarter was reported to £968.26, decreasing by 3.2% comparing to previous quarter.

AA Insurance said that the sharp decline in the first quarter car insurance premiums was due to the great competition in the business, as most policies are renewed during the first three months of the year. The group also warned that the decline is temporary and the premiums could see a growth in coming two quarters.

However, the Shop around Index of AA, an index of the cheapest quotes, grew by 0.6% for comprehensive cover and 4.5% for third party, fire and theft for the first three months of the year. The Shop around Index tracks the average of the three lowest quotes available for different risk profiles.