Sometimes chasing comment on stories can be a difficult task for a journalist with firms treading carefully about what they can and cannot say in the public domain. The day of the Chancellor’s Autumn Statement, however, was not one of those days.
Within minutes of the story breaking, the news desk here at
Insurance Business was
awash with comment – this time it wasn’t us picking up the phone and making the calls, it was insurers reaching out to us to have their say on what was generally branded an ill-judged premium rise. However, soon it might not only be the insurers shouting from the hilltops about the injustice of it all – it may soon be the consumers too, especially if new figures on premium increases are to be believed.
Just days after several insurers had promised to
pass on savings to consumers following proposed whiplash reforms, the bulk of those savings appeared to be wiped out by Chancellor Philip Hammond’s 2% rise in premium tax that means that the tax has now doubled in just two years – from 6% in 2014 to 12% today. According to Simon Stanney, director of insurance at SunLife, the impact is going to hit consumers where it hurts the most – in the pocket.
“We already have a situation in this country where around a quarter of people do not have home contents insurance and almost half don’t have any life cover,” he commented. “And when it comes to car insurance, many drivers, particularly young people are really struggling to afford premiums as it is.”
So by just how much will the rise hurt consumers?
According to Confused.com figures, the average car insurance premium stands at £737 currently, although 17-year-olds face much higher costs – currently averaging £2,083. Now, with the 2% rise, estimates put the average at £751.74, with 17-year-olds facing average costs of £2,124.
Car insurance, however, is just the beginning.
According to Association of British Insurers figures, the average home and buildings insurance policy costs £291 currently – a figure that is set to break the £300 barrier thanks to the IPT leap. Meanwhile, SunLife figures suggest that for around £100,000 of life insurance cover, people can expect to pay around £2.50 extra if they are non-smokers and an extra £4.80 if they do smoke. The rises may not seem too staggering, but Stanney believes the consequences could be far-reaching.
“These rises, though they may seem minimal, could result in many people underinsuring - which is already a problem as among those who have life insurance, one in 10 know that they do not have enough - or worse, not insuring at all, leaving them completely unprotected,” he explained.
“What the Chancellor should be doing is encouraging people to protect themselves, their families and their belongings, not making it even more difficult for the most vulnerable people to get insurance.
“If the worst happens – a house fire, flood, car accident or illness or death in the family, it is always families on lower incomes that struggle the most. By making insurance even more expensive, many of the ‘Jams’ may have no choice but to forgo insurance as they simply cannot afford it, potentially leaving millions of families unprotected.”
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