Insurance premiums 'rising due to tax change'

Insurance premiums are set to rise especially for those who already pay a lot such as younger drivers

Insurance premiums are set to rise especially for those who already pay a lot such as younger drivers

Average home insurance costs rose 2%, which was below the 2.7% rate of inflation for the economy as a whole, in the year to April to £121, and were virtually unchanged in the past three months.

Overall, the rate of IPT at 12 percent could now be adding an extra £283 a year to a typical household's annual insurance bill as the rate has now doubled since November 2015.

It will be passed on by insurance companies in the form of higher premiums to customers who renew their policies from today.

According to calculations from the Association of British Insurers (ABI), the latest IPT increase could add an extra £47 to the average household's annual general insurance bill.

Steve White, chief executive of the BIBA, said: "This rapid increase is unprecedented - between 1997 and 2015, a period of 18 years, there were only two rate rises, taking the rate from 4% to 6%".

Brian Walters, principal of Cheltenham-based medical insurance brokers Regency Health, said: "The latest insurance premium tax increase heaps more pressure on the private medical insurance market, which is already approaching an affordability crunch".

It estimates the tax rise will affect 20.4 million homeowners/renters with contents insurance, 20.1 million motorists, 3.2 million homeowners with mortgage protection, 1.9 million people with private medical insurance and 3.4 million pet owners. If insurance premiums continue to increase, small business take-up of insurance will dip, and it will be those most at risk that will be affected.

This latest hike will mean that the Government will rake in £5.8 billion a year from IPT.

This latest rise comes at the worst possible time, with average premiums rising due changes to how personal injury compensation is calculated, rising fix bills, and a resurgence in whiplash-style claims.

With IPT having doubled in under two years, ABI calls for a freeze on this raid on the responsible.

Businesses who take out commercial insurance could also face a considerable increase to their costs.

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