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Average car insurance premium to hit record high

Average car insurance premium to hit record high | Insurance Business UK

Average car insurance premium to hit record high
The average cost of car insurance is expected to hit a record high next month once the government’s hike on the insurance premium tax (IPT) takes effect, according to data from comparethemarket.com.

Motorists can anticipate paying £800 for an average policy, as the IPT rate will rise from 10% to 12%. That’s £100 more than a year earlier, and a 33% rise since June 2015.

“This is somewhat of a watershed moment for car insurance. The cost of an average policy has risen by around a third in two years, demonstrating just how difficult it is for people to get on the road,” said Simon McCulloch, director at Comparethemarket.com.

Separate research from specialist motor insurer ERS has revealed that the hike will result in an extra £5 for standard drivers and £45 more for commercial drivers.

Although low interest rates and the “cyclical nature” of car insurance have played a part in the rising premiums, McCulloch said the “hyperinflation” caused by the government’s changes has disproportionately pushed up the cost of driving.

“One of the most prominent causes of these rises is the doubling of insurance premium tax over the past two years. Equally, the recent decision by the Ministry of Justice to change how compensation is calculated, has also added substantial amounts to the average person’s policy,” said McCulloch.

Industry groups such as the Association of British Insurers (ABI), the British Insurance Brokers’ Association (BIBA), and the Managing General Agents’ Association (MGAA) have gone on record against the hike. In an open letter last March, they said IPT affects more than 50 million policies purchased by businesses, charities and individuals.

“IPT is a stealth tax that hits households, charities and businesses who do the right thing and these increases have cost some families hundreds of pounds a year already,” said the groups.

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