“The mother of all stealth taxes.”
The Association of British Insurers (ABI) wasn’t exactly mincing its words in describing Insurance Premium Tax (IPT) as it released its latest premium tracker. And perhaps with good reason – the price paid for comprehensive motor insurance during the last quarter reached its third highest level since data collection began back in 2012.
The tracker, which examines the prices actually paid for cover rather than those quoted, showed that in quarter four 2019, the average premium paid stood at £484 – that’s up £15 and 3% compared to the previous quarter. Overall, the average motor premium paid during 2019 was £471 – that’s the third highest annual figure on record.
In explaining why premiums have reached such levels, the ABI pointed the finger at the Government’s changes in the personal injury discount rate, rising repair costs, the cost of vehicle theft – which is up 18% on the same period in the previous year, but, most of all, at IPT.
“Motor insurance may remain very competitive, but motorists still face being on the receiving end of the mounting cost pressures that insurers are facing,” said Mark Shepherd, ABI’s assistant director and head of general insurance policy.
“One obvious and much needed way to help motorists is for the Government to reduce the IPT burden in its March Budget. This tax penalises drivers for simply complying with the law and having motor insurance, hitting hardest those facing higher premiums, such as younger drivers.”
His words have already received industry backing with David Williams, MD, underwriting and technical services at AXA Insurance, highlighting that insurers themselves are doing their best to keep prices in check.
“Car insurers do their best to keep costs down but other factors affect pricing, including increased vehicle thefts, repair bills, and the discount rate used to calculate personal injury compensation,” he said. “Since the Insurance Premium Tax adds on average £50 to motor premiums, we urge the government to cut IPT to keep car insurance affordable. Making sure all drivers have insurance is the best way to protect all road users, and an IPT reduction would encourage those good behaviours.”
What is your opinion on IPT? Leave a comment below with your thoughts.
