Car insurance premiums will have to rise by 20 per cent for insurance providers to make a profit, a finance information service has stated.

Defaqto, the financial information service, stated that the average increase in car insurance premiums in 2008 – which was around 8.7 per cent – was not enough to bring back any underwriting profitability for car insurance companies.

The organisation explains in its report 'Motor Insurance 2009: Another Bumpy Ride', that in order to become more profitable, the car insurance market will need to charge customers an additional 20 per cent.

However, despite the insurance rate hikes, Defaqto also stated that this will not be enough to ensure that profitable returns will come in for car insurance providers.

Mike Powell, who is the principal consultant for general insurance at Defaqto, said: "Motor insurers are going to need to think carefully about choosing to write for profit or market share.

"They are not going to be able to do both. Even in the commercial motor market, where there has been consistent profitability for the past few years, profitability is on a knife edge."

This comes after AA Insurance noted a rise in car insurance premiums for motorists in the UK.