Car insurance premiums are set to rise in the UK
Insurance premium tax, IPT, is scheduled to rise tomorrow.
The increase in IPT will see the average cost of car insurance rise to a record high. Average car insurance premium costs are set to increase to £800 starting from tomorrow, adding on average £15 to motorists’ policies.
In the past year, British motorists’ average premiums have increased by around £100 – and up to £200 in the past two years.
Insurance rates have increased three times since 2014. In that time, IPT rates have doubled from six to 12 per cent, with consumers forced to bear the brunt of the spiralling costs.
The price hikes have generated £13 billion over the past five years, according to Association of British Insurers, with an extra £5 billion expected to be raised in the 2016/17 tax year.
In February, Justice Secretary Liz Truss announced there would be a change to the Ogden discount rate, which is used to calculate compensation payouts for serious personal injuries.
This change added on average £75 to car insurance premiums and left the NHS with a £1 billion annual bill.
Simon McCulloch of comparethemarket.com said: “This is somewhat of a watershed moment for car insurance.
“The cost of an average policy has risen by around a third in two years. One of the most prominent causes of these rises is the doubling of insurance premium tax over the past two years.
This is somewhat of a watershed moment for car insurance
“Equally, the recent decision by the Ministry of Justice to change how compensation is calculated, has also added substantial amounts to the average person’s policy.”
Amanda Stretton, former racing driver and motoring editor at Confused.com, revealed how this will impact car insurance prices: “From June 1st the 2% hike in Insurance Premium Tax could add an average of £16 to drivers’ annual car insurance costs.
“This means that the average premium will almost break through the £800 barrier, as it increases from £781 to £797.
“While it is likely that many insurers will have already factored this tax into their pricing structure, we’d recommend that drivers try shopping around before June 1st to try and get a better deal.
Justice Secretary Liz Truss made changes to compensation payouts in February
“It’s easy to see why drivers are so upset about yet another IPT rate rise since it has doubled in the last 18 months.
“There are many factors influencing the rise in car insurance prices but, to put the IPT rate rise into context, the average premium was £629 in October 2015 when IPT was just 6 per cent.
“And with drivers having to bear the additional brunt of recent changes to the Ogden tax, we expect average insurance premiums will be on course to hit a whopping £1,000 by the end of next year.
“Thankfully, insurers are now required to show drivers the price of their premium from the previous year at the point of renewal, which will serve as a reminder that loyalty doesn’t always pay.
“Motorists looking to avoid car insurance price hikes should to take note of their renewal price and run a quote through a car savings site, such as Confused.com, to see if they can get a cheaper premium elsewhere.”
Drivers are now being encouraged to shop around to find the best deal and think of other cost cutting measures to keep premiums low.
It recently came to light that dash cams can help to cut car insurance premiums by up to 20 per cent.
Black box technology/telematics is another method drivers can use to shave cash of their policy.