UK motor premiums post biggest rise in 15 yrs-survey

* AA says premiums rose 5.6 pct in Q3, 14 pct yr-on-yr

* Says premiums could rise 20 percent

* Says higher premiums driven by claims, fraud

LONDON, Oct 22 (Reuters) - The cost of insuring a car in Britain rose at its fastest pace in 15 years during the third quarter, fuelled by rising personal injury claims and fraud, according to a survey from roadside assistance group AA.

The average quoted premium for comprehensive motor cover rose 5.6 percent to 821 pounds during the three months to Sept. 30, and was up 14 percent compared with a year earlier, the AA said on Thursday.

The increase, the biggest since the AA survey began in 1994, shows that a combination of rising claims expenses and dwindling investment income is forcing insurers to raise their prices in spite of intense competition, the AA said.

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

Douglas said premiums could rise as high as 20 percent, returning the industry -- which currently pays out 110 pounds in claims for every 100 pounds taken in premiums -- to profitability at the underwriting level.

The AA said the motor insurance industry is under pressure from rising personal injury claims, which topped 9.6 billion pounds last year, and from fraud, which cost it 1.9 billion pounds.

The UK's biggest car insurer is Royal Bank of Scotland (RBS) (RBS.L), which sells motor insurance over the phone and online through the Direct Line brand. Its shares were down 1.8 percent at 1145 GMT. (Reporting by Myles Neligan; editing by Karen Foster)