Home insurance premiums are starting to rise following a doubling of insurance premium tax in the past two years.
Research from the AA shows that following a flat first quarter the average, the “shoparound” quote – based on the average of the five cheapest premiums from insurers – for an annual combined buildings and contents policy increased by 2.0% to £157.59 over the three months ending 30 June.
Over 12 months the average increase is just 1.1%, up by slightly less than £2 compared with this time last year.
The typical cost of a contents policy rose 3.1% over the quarter and 3.0% over 12 months to £61.16, while a buildings insurance policy went up 1.6% over the quarter and 2.4% over 12 months to a typical shoparound quote of £112.69.
The AA said the recent rises were down to the doubling of insurance premium tax in less than two years – from 6% in October 2015 to 12% from June this year.
Since November 2015 three successive government rises will have doubled the rate of IPT by June this year from 6% to 12%.
Mike Lloyd, the AA’s director of insurance, said: “The Treasury has pointed out that insurance premium tax is higher in other European countries such as France and Germany and I fear that there will be a further increase in the Autumn Budget to prop up the Government’s crumbling finances.
“This is a sneaky tax that punishes people who do the right thing by protecting their homes and cars.
“And there is an important difference between the UK and Europe. Most countries’ insurance premium tax pays for regulation of the insurance industry. But in the UK, insurers are expected to pay direct for their own regulation and pay insurance premium tax which, apart from just 0.5% used to help finance flood defences, goes straight into the Treasury’s coffers.”
The weaker pound is putting pressure on home insurers as well as rising rebuilding and repair costs and fraud, while competitive pressure is keeping premium increases to a minimum.
Border and Tyne-Tees has seen the largest increase in home insurance premiums for a typical combined home and contents policy with premiums up by 2.8% to £152.03.
The most costly region to insure a home remains London and the South East, with premiums increased by 1.6% to £165.82. The West Country enjoyed the lowest average quoted premium at £147.21, including a 2.2% increase in premiums over the second quarter of the year.
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