Motor insurance giant AA has warned that the Chancellor may announce yet another increase in Insurance Premium Tax (IPT) in his anticipated Autumn Statement on Wednesday.
The insurer and other industry experts expressed concern that the Chancellor may add a further 2%, or £10.70 in IPT, increasing the stealth tax to 12%.
Michael Lloyd, the AA’s director of insurance, said that another rise in IPT will not help in cutting the number of uninsured cars in the UK as it makes insurance less affordable.
“I’m calling on the Chancellor to think again and, rather, reduce the burden by 2%,” Lloyd said.
“That would send a strong message that the Government is on the side of consumers and is keen to protect honest motorists from the serious risk imposed by uninsured driving,” he added.
Lloyd said the insurance industry has already pledged to bring down the cost of cover as the government implements reforms that would reduce fraudulent whiplash injury claims.
Meanwhile, the Association of British Insurers has reiterated its call to the government to freeze the rate of IPT.
The industry body said the combined impact of the IPT hikes in November 2015 and last Octo
ber could have added an extra £109 to the annual insurance bill of a typical household.
The ABI said there should be no “nasty surprises” that could increase the cost of insurance for families that are “just managing”.
“The Prime Minister has said she wants to help those who are just managing. This tax impacts hardest on those least able to afford it, and often in greatest need of the protection that insurance provides,” said James Dalton, ABI’s director of general insurance policy.
“Any further hike in IPT could not only affect millions of people directly in their pocket, but result in some people reducing or dropping their insurance cover completely,” he continued.
Dalton added that IPT could also hit companies as it could “drive up the costs of commercial insurance.”
“It is time to stop this raid on the responsible,” he said. “IPT is penalising millions of households and businesses throughout the UK who are doing the right thing by taking out insurance to protect themselves.”
The impact of IPT on insurance revealed
AA report: The factors driving up car insurance premiums