Car insurance Updated:
Car insurance premiums have been heavily impacted by the recent hike to insurance premium tax (IPT), and new figures from Consumer Intelligence show just how quickly prices have risen – their data shows that average best buy premiums increased by 13% in the year to February, so even those seeking the lowest-priced deals on the market could be paying more than a year ago.
The 13% increase means that the average car insurance premium now checks in at around £683 – and it's older drivers who have suffered the most. The figures show that average premiums for those aged 50+ rose by 15.3% in the year to February, and although their premiums are still the lowest overall (an average of £298), the increase won't be welcome.
Conversely, younger drivers are actually faring slightly better when it comes to car insurance rises; analysis suggests that this is due to the rising uptake of telematics (or black box) policies, which is limiting price rises for this age group – premiums for the under-25s rose by just 9.3%, which although still puts their average premiums at £1,600, is a lesser increase than many other age groups (those aged 25-49 saw premiums rise by 13.7% to £530).
In even better news for younger drivers, their average premiums are still around 15% lower than they were in October 2013 – again driven by the use of telematics policies, with 48% of the best deals for younger drivers incorporating this technology – while older drivers have seen their premiums rise by 22% over the same period.
"Average motor insurance premiums are heading upwards at a rapid rate, with the Insurance Premium Tax being a major factor," explained Ian Hughes, chief executive of Consumer Intelligence. "Under-25s who pay the highest average premiums at £1,600 need to seriously look at black box technology as a way of limiting price rises but can take some comfort from the fact that prices are still lower than they have been.
"However, all customers need to ensure they are receiving the best value for money from their insurer, which is being made easier as providers need to make it clear what last year's premium was when they send renewals."
Unfortunately, there are concerns that there could be more to come for already hard-pressed motorists, with fears rife that another hike to IPT could be on the way – the second in the space of six months.
There have been reports that the Chancellor could include another IPT hike in tomorrow's Budget, with estimates putting the potential new rate at 12.5%. If that comes to fruition, it'll mean the tax has risen by 108% in the last six months – IPT previously stood at 6% before rising to 9.5% in November (which was first announced in the July Budget last year), so if it rises to 12.5%, it will have more than doubled.
The AA argues that the IPT tax hike has "already hit millions of people doing the right thing by taking out car insurance", as well as those seeking home insurance, pet insurance, medical policies and even breakdown cover. Their analysis shows that the last increase added an extra £100 to the annual cost of insurance for many households, and if it rises to 12.5%, it could add an extra £37 to average car insurance premiums alone.
"If the Chancellor does this it will be the only tax to have doubled in half a year," said AA president Edmund King. "It would be a double-whammy con on drivers as it hits car insurance and breakdown cover." He adds that, should the price rise happen, "we will do all in our power to show our members and customers exactly how much the Government is taking from them", with the AA vowing to clearly show how much of an impact IPT has on their insurance premiums.
There's no definite word yet on what the Chancellor is planning in terms of IPT, if anything, but while this kind of tax rise can't be avoided, there are other things you can do to bring down the cost of premiums – and the most important thing is to shop around. Comparing car insurance policies will ensure you're getting the best possible price, so don't automatically renew with your insurer or put up with rising costs – if there's a better deal out there, comparing the options will help you find it!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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