The cost of car insurance is rising at its fastest rate on record, research has shown.

Average premiums for comprehensive motor cover jumped by 5.6% in the three months to the end of September, the biggest increase since the AA first started monitoring the market in 1994.

The annual rate at which the cost of the cover is rising also hit a new high of 14%.

Simon Douglas, director of AA Insurance, said: "Most drivers will be seeing sharp increases when they renew their annual insurance premiums. The index suggests that 89% of insurers have increased their premiums by more than £5 over the past quarter. Only 2.5% reduced them."

The group, which analyses quotes from 90 insurance companies and brokers for 1,000 customer profiles, found the average cost of comprehensive car insurance had risen from £721 a year ago to £821 now.

It warned that further increases were likely to be on the way, as car insurers were currently paying out an estimated £110 in claims and costs for every £100 they received in premiums.

Mr Douglas said: "Last year one industry commentator said that premiums must increase by at least 20% if the car insurance sector was to return to profitability. At the time I thought this unlikely but it looks as if that prophecy might be fulfilled.

"Car insurers are facing fast rising costs, reserves for paying claims are depleted and investment income has fallen, largely because of the recession.

"Despite motor insurance being one of the most competitive markets in the UK, insurers have little choice but to put premiums up."

The AA said the main factors fuelling the premium increases were the rising cost of personal injury claims and fraud, which cost the industry £9.6 billion and £1.9 billion respectively last year. There has also been a rise in the number of uninsured drivers on the road, while there was a 15% jump in the number of thefts of upmarket cars, with thieves often first stealing the keys.