Motor insurance premiums are set to rise by 25% this year, according to a report by Mintel.

The market researcher angered body repairers by blaming much of the increase on "sharply rising" labour rates, combined with high parts costs and personal injury claims.

Repairers say labour rates have barely risen in the past few years, while there has been an explosion in free customer services like courtesy cars and valeting.

The insurance industry suffered intense price competition during the Nineties, which forced many companies to endure losses. Mintel claims the sector will not move back into profit until 2001/2002.

Sir Richard Branson's Virgin Group is to move into car insurance in a deal brokered with the AA. It is believed Virgin will act as an 'introducer' to the AA, though the service will bear the Virgin name.