The Royal Bank of Scotland group is the latest insurer to increase premiums on motor insurance. It has increased premiums by 5% with immediate effect and will add a further 1% to premiums per month for the first six months of 2007.

The move by RBS follows the controversial decision by Norwich Union in September 2006 to increase premiums for some drivers by as much as 40%.

"It has been well publicised in the market that the present position is unsustainable," said a spokeswoman for RBS. "Over the last four years the cost of claims has been rising by 5%-6% a year. At the same time the prices we charge to our customers have remained static. Our approach is to introduce increases on a progressive basis rather than presenting customers with an excessive and unpalatable one-off increase at renewal."

Direct Line, Privilege, Churchill, Lloyds TSB, Prudential, Tesco, Egg, Virgin Money and Nationwide are just some of the big brands backed by RBS, and motorists looking to shop around for a better deal must be careful of not simply switching from one RBS backed brand to another.

Around half the nation's motorists simply renew their existing policy each year, while another 20% get only one alternative quote before signing up.

The warning that premiums are set to rise in 2007, follows the latest quarterly motor insurance report by accountancy firm Deloitte, published this week, which reported that average motor premiums in 2006 actually fell by 2%, to £450.

Commenting, Catherine Barton, insurance partner at Deloitte said: “The motor insurance marketplace has become increasingly competitive this year as insurers vie to win market share. This is great news for consumers who will benefit from lower quotes on their motor insurance.”

"In a deteriorating market we would expect insurers to be raising their premiums to counter rising claim costs. If other insurers choose to follow Norwich Union's lead then this could help curb the overall decline in the motor insurance market's operating performance."