For the first time on record average car insurance premiums are predicted to break the £600 barrier as insurance firms set higher costs following this week’s insurance premium tax hike.
Last Wednesday, Philip Hammond: the Chancellor revealed he plans to rise premium tax from 10% to 12% after June 2017.
For drivers, this means the average currently giving an estimate of £50 yearly to the Treasury as they insure vehicles, will increase to over £60. Younger drivers may need to pay more than £250 just in the IPT part of their premium, revealed comparison website GoCompare.
IPT, levied on an estimated 50m insurance policies which included car, home and medical, which has increased nearly 5 times since introduction in 1994 at a rate of 2.5%. The AA stated the bonus tax will put even more pressure on drivers who already face increases in underlying premiums. The benchmark British Insurance Premium index reveals a 16.3% increase over the last 12 months with an average “shop around” premium at £586.
“It’s disappointing the chancellor seems to have used the potential £40 saving on the average premium due to whiplash crackdown, to increase IPT,” the AA told reporters. “The upward pressure on premiums continues which coupled with the unwarranted hike in IPT will see premiums go through the £600 mark before any benefit from the whiplash crackdown takes effect.”
Insurance spokesman, Matt Oliver stated there are still “genuine inflationary forces in the market. This means it is unlikely we will see any real flattening for motor premiums in the next few months. Until firm action is delivered on whiplash and the compensation culture, claims cost will continue to rise. Any signs that the rate had slowed earlier this year are likely to be completely undermined by the announcement of a further increase in IPT.”
From Comparethemarket.com, head of motor insurance Dan Bass spoke regarding the matter: “This year has been tough for British drivers, with premiums rising consistently throughout the year. But it’s not all doom and gloom. The bigger the difference between cheapest and average premiums, the greater the saving that can be made by shopping around.”
Here’s what you can do to keep premiums down:
- Research when renewing is vital, make sure it’s done far in advance. Quotes are significantly less (by £100) if bought 30 days in advance, rather than a day or so before the cover is needed.
- Do not overbuy cover – When you drive around 5,000 miles per annum, make sure you don’t insure for 10,000. If you’re able to park off-road, do it and mention that to your insurer.
- If possible add a relative as a named driver – this can lower premiums by hundreds of pounds.
- Custom cars look great but are costly. The more you add to your car such as sports exhausts and spoilers the higher you can expect insurance to be – however, be sure to add a tow bar to your vehicle. Adding one of these can decrease premium by as much as 20%.
The hike can mean some drivers are forced off of the road, simply because they can’t afford insurance premiums on top of all the other costs that come with a car annually. This means researching into insurance costs is now more important than ever for those who need to save as much as possible.