Customers have been warned that premiums will go up thanks to a tax rise that has now come into force.
The Insurance Premium Tax (IPT) rate has increased from 10% to 12%, with motor, home, pet and health insurance all affected.
The rises – which will add around £20 to a young driver’s premium – have led to fears that more and more people will risk going uninsured.
The increase means that the rate of tax paid on most insurance policies has doubled in less than two years, up from 6% in 2015.
The increase could add an extra £47 to the average household’s annual general insurance bill, according to the Association of British Insurers (ABI), which represents insurance firms.
Calculations suggest that the tax rise will add £8 to the average motor policy.
It could add £20 to the bill for a 19-year-old whose motor insurance premium was already much higher than the average, owing to the greater risk posed by younger drivers.
Businesses who take out commercial insurance could also face a considerable increase to their costs.
The British Insurance Brokers’ Association (BIBA) said it is concerned pricier policies will lead to more people going without or reducing their cover.
Steve White, chief executive of 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%”
He called for a freeze on the tax to be imposed for the term of the next Parliament.
A percentage tax bears heaviest on those who have the most expensive policies, such as young drivers or people living in less well-off areas or flood zones.
A spokesman for the Treasury said: “Insurance Premium Tax is a tax on insurers, not consumers – insurance firms decide whether to pass it on to their customers or not.
“IPT is higher in several European countries, including France and Germany, than it is in the UK.”
Source: ADI News
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