Home insurance prices have increased 3.1% to £119 in the past three months following the introduction of Insurance Premium Tax in November. Insurance market research firm Consumer Intelligence found that the tax rise is being passed directly to homeowners, reversing years of falling premiums. The Insurance Premium Tax – the tax paid each time an insurance […]
Home insurance prices have increased 3.1% to £119 in the past three months following the introduction of Insurance Premium Tax in November.
Insurance market research firm Consumer Intelligence found that the tax rise is being passed directly to homeowners, reversing years of falling premiums.
The Insurance Premium Tax – the tax paid each time an insurance policy is purchased in the UK – went up from 6% to 9.5% on 1 November last year.
It was first introduced to the UK in 1994 and the increase is the fourth in the standard rate since its introduction.
Recent storm and flood damage, which could exceed £1.5 billion, will also increase the pressure on premiums, Consumer Intelligence said.
Homeowners over 50 are paying slightly less on average than younger customers – £110 compared with £127 for the under-50s.
Home insurance customers can take some comfort from recent price falls – average premiums are still slightly below the rate of a year ago by 0.8%. However they are 9.5% lower than in 2014.
Ian Hughes, chief executive of Consumer Intelligence, said: “Unfortunately the only way is up now for home premiums following years of price cuts driven by a big reduction in burglaries and fewer claims for flood and storm damage thanks to recent milder weather.
“The rise in Insurance Premium Tax has reversed the trend dramatically with a sharp rise in the past three months. The recent series of storms and floods with claims of up to £1.5 billion expected will add to the pressure.
“That makes shopping around for home insurance and haggling with your existing insurer even more important to ensure your premium remains as competitive as possible.”
The tax increase is expected to bring in an additional £8.1 billion for the Treasury by 2021.
The Association of British Insurers said that a family with two cars, a pet and medical insurance could see their insurance costs jump £100 a year.
It warned that IPT should not be seen as a “soft touch tax” to raise revenue as any increase leads to a further financial squeeze on millions of households and businesses who have done the right thing and taken out insurance.
James Dalton, director of general insurance policy at the ABI, said: “Insurance Premium Tax penalises the millions of people and businesses throughout the UK who do the right thing by taking out insurance to protect themselves against life’s expensive uncertainties.
“At a time when personal injury costs are pushing up average motor insurance premiums, a further hike in IPT is the last thing the UK’s hard pressed motorists need. And with the Government keen to encourage less reliance on the state, any move that raises the cost of private medical insurance would be counter-productive.
“The UK insurance market is highly competitive, but affordable insurance cannot be taken for granted. IPT should not be seen as a soft touch by the Chancellor, as further increases will hit people in the pocket hard, or even worse could see people starting to reduce or drop their cover altogether.”
