Millions of drivers and homeowners face paying £100 more for their insurance policies each year due to an increase in Insurance Premium Tax (IPT), insurance experts have warned.
Chancellor George Osborne announced a rise in IPT in his Summer Budget. Subsequently, this rate has risen from 6% to 9.5% with effect from 1 November 2015.
The Association of British Insurers (ABI) suggests that this new increase will add an additional £13 to comprehensive car insurance policies, £40 to the standard price of private medical insurance and over £10 to the price of buildings and contents cover.
However, the AA has warned that young motorists and drivers residing in London will be the hardest hit.
The motoring organisation suggests that drivers below the age of 22 will have to pay, on average, an additional £42 per year, whilst Londoners will be required to pay £31 extra.
AA Insurance reports reveal that the average insurance quote for drivers aged between 17 and 22 will rise from £1,278 to £1,319.
This has prompted fears that the new tax increase could entice people to drive without legal insurance policies.
Janet Connor, managing director of AA Insurance, stated: ‘Already, premiums have risen by nearly 10% over the past six months and the IPT rise will only pile on the misery.’
It is estimated that 7.3 million car owners, 4.7 million household insurance policy holders, 3 million private medical insurance policy owners and 3 million pet owners will be affected by the rise in tax.
Insurance categories such as travel, life and mortgage policies are exempt from IPT.