Car insurance soars by £100 in just a year

Firms ‘cashing in’ after tax rise

MILLIONS of motorists are paying around £100 more for car insurance this year – a 13.5 per cent increase. The average premium jumped from £696 to £799 in the year to August, analysis published yesterday revealed.

Older drivers aged at least 50 were hit with the biggest increase after their premiums went up by 15.3 per cent – from £258 to £348.

Younger motorists saw their premiums go up by 9.4 per cent from £1,680 to £1,831, according to market research firm Consumer Intelligence.

Insurers have blamed the rise for all age groups on an increase in insurance premium tax (IPT) imposed by former chancellor George Osborne.

This affected all car, home, private medical and pet insurance policies.

The industry also cited a rise in claims for neck injuries, and the spiralling cost of repairing increasingly high-tech cars.

But campaigners last night accused firms of using IPT as an excuse to push premiums up.

The tax rise – announced by Mr Osborne in July 2015 – is expected to generate £1.5billion a year for the Treasury.

It was billed by the Government as a tax on insurance firms, but they have simply passed on the cost to customers.

IPT was increased from 6 per cent to 9.5 per cent last November. But it is due to rise to 10 per cent next month – meaning the levy has increased by two thirds in less than a year, affecting 26.5million motor policies.

Mr Osborne defended the increase, arguing the Government’s efforts to crack down on fraudulent claims had helped to push down costs for motorists. But the insurance industry and consumer groups say it is a ‘stealth tax’ on drivers.

They also warn that people with higher premiums – such as younger and older drivers, households in inner city districts or high flood-risk areas and people

‘They’re hiding behind this tax’

with ongoing medical conditions – will be hardest hit.

This is supported by Consumer Intelligence’s analysis. It found that drivers in the North West were hit with the biggest increase in premiums after average bills rose 17.3 per cent to £1,177. The AA says IPT has added around £19 to the average premium and £40 to £45 for younger drivers.

But James Daley, of the campaign group Fairer Finance, said: ‘It is a bit rich for insurers to blame the rise on IPT, as it has accounted for a fraction of the rise in premiums.

‘They appear to be hiding behind this tax to justify these big increases.’

Last month, an undercover investigation found that even drivers involved in a crash that was not their fault are forced to pay up to 40 per cent more.

The consumer group Which? said Esure increased a quote by 39 per cent after a claim in which the driver was blameless.

An Association of British Insurers spokesman said the industry had been clear that the rise in premiums had various causes, including IPT, adding: ‘IPT is a raid on the responsible, penalising those households who do the right thing and protect themselves by taking out insurance.’

Insurers have quietly increased premiums for years, hoping customers would not notice.

One tactic was to omit the previous year’s premium from renewal letters hoping drivers would forget how much they paid before – a ruse thought to cost customers £1billion a year.

But last month, in a major success for Money Mail, which exposed the racket, firms were ordered by the Financial Conduct Authority to tell clients what they paid before.