Car insurance could be about to get more expensive!
Just when you thought it was safe to go back to the forecourt and get yourself a shiny new car, it turns out that UK motorists are likely to be hit with a hefty increase in the cost of car insurance policies.
Research by the AA has revealed that the Chancellor is once again looking into a big jump in the amount we pay in insurance premium tax. It is expected that the average car insurance policy will be around £40 higher as a result of this. Westminster insiders have also mooted the increase, with a rumoured figure of 3% rise on all insurance premium tax prices. These increases will not just affect car insurance prices, but also home and pet insurance, meaning that at least 50 million policy holders are about to get a nasty surprise.
The first IPT increase was announced in 2015, marketed as a tax on insurers which could be passed on to the customer, sparing the insurance company from paying that bill. It went from 6% to 9.5%, and came into force in January. IPT tax increases have meant an average increase of around £100 to the annual insurance bill paid by many customers, with a similar figure expected again this time.
Looking specifically at car owners, this is an additional £20 for each policy. If the Chancellor goes for a 3% increase, that would be yet another £20 increase. The biggest sufferers are bound to be young drivers, who already pay a great deal more for car insurance than those over the age of 25. The 3% increase would mean an £80 increase on the prices from December 2015.
The President of the AA, Edmund King, pointed out that another 3% increase would mean that IPT is the only tax which has doubled in six months. He also struck out at Harriett Baldwin, the Treasury Minister, when she said that IPT was not a consumer tax, but an insurance company tax, since that was pretty much the same as saying that fuel duty isn’t a driver’s tax, it’s a petrol station tax.
The AA also fears that if the price of insurance increases again, it will put it out of the reach of many motorists, who are already feeling the pinch when it comes to the amount of taxes which they pay on insurance policies and other purchases. Rather than scrimp and save to meet the cost of their insurance, the AA suspects that many people will just not bother, leading to thousands of people driving their vehicles around without insurance. Their figures indicate that the amount of uninsured drivers on the roads has increased significantly since the last hike, as many just can’t afford it.
Given that it’s something demanded by law, the AA is worried that the Chancellor is treating insurance like a luxury item, rather than a necessity. In a poll carried out by the AA in 2015, 87% of respondents said that they agreed that increasing insurance premium tax would encourage uninsured driving, putting us all at risk.