If you drive a car, insure your home or pay to protect your pets, the cost of your cover will rise from today due to a third tax hike insurance premiums in just two years.
Insurance premium tax is payable on most general insurance policies, such as car and home cover, as well as on pet and private medical insurance. The tax has doubled since 2011 – from 6% to 12% from 1 June 2016.
The Association of British Insurers – which represents insurance firms – has warned that the increase comes ‘at the worst possible time’, with drivers already paying record highs for car insurance due to a change in the way that personal injury payouts are calculated.
It says that insurance premium tax could be adding £283 on average to a family’s annual insurance costs, if they have buildings and contents, two cars (with one young driver) and pet insurance for two dogs. The latest increase could add £47 to the average household’s annual general insurance bill.
How much will insurance premiums go up by?
The British Insurers Brokers’ Association has said that millions of people will be stung by the tax increase. These include:
- 20.4 million home owners/renters with contents insurance;
- 20.1 million drivers with motor insurance;
- 3.2 million home owners with mortgage protection
- 9 million people with private medical insurance;
- 3.4 million pet owners.
The latest round of increases could range from just £2 to as much as £39, depending on the type of cover you pay for. The Association of British Insurers says that a 19 year-old driver could see their premiums go up by £20.
The table below shows the potential of the tax hike on average annual car, home, pet and private medical insurance premiums.
|Insurance premium tax – what impact could it have on your bills?|
|Type of insurance||How much insurance tax now adds to your premium||How much the latest increase could increase your premiums|
|Average car insurance premium||£50.00||£8.00|
|Car insurance for a 19 year old||£119.00||£20.00|
|Buildings and contents insurance||£32.00||£5.00|
|Pet insurance overall||£37.00||£6.00|
|Private medical insurance||£231.00||£39.00|
|Source: Association of British Insurers. Figures are average insurance premiums.|
How can I cut the cost of my insurance bill?
This latest hike makes it tougher to find a cheap insurance deal, but with a small bit of planning and research, you could challenge your existing insurer to offer you a better deal – or walk away to a new one.
Check last year’s premium
Since April 2017, every insurer has been obliged to publish the premium you paid the previous year when it offers you a new rate to renew your cover, so you can see how much your insurance has gone up.
Use comparison sites
Armed with this information, use a couple of price comparison sites to search for equivalent cover, and see if there are any insurers offering a cheaper quote.
Insurers tend to offer some of their lowest prices on these sites, hoping to win your custom and then increase premiums when you come to renew after one or two years.
It’s also worth getting quotes directly from insurers that aren’t on comparison sites.
With a list of the cheapest quotes, call your original insurer and ask them to match what you’ve found elsewhere.
In November 2016, we asked more than 4,000 Which? members if they’d haggled over the cost of their car insurance in the past year. Around half said they’d given a go – and 79% of them were offered a better deal or an incentive to stay by their insurer.
If it won’t match the prices you’ve found from other insurers, be prepared to walk away – there’s no bonus for loyalty.
Find out more: How to get cheap car insurance