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Tax hikes lead to higher home insurance costs

Tax hikes lead to higher home insurance costs

Category: Home insurance

Updated: 25/05/2017
First Published: 26/05/2017

It may have felt like winter lasted forever this year, but despite it being with us for months on end, it was surprisingly mild – which makes the finding that home insurance costs edged up rather unexpected.

That's according to analysis from market research experts Consumer Intelligence, which shows that the average annual home insurance premium has risen by 2% in the last year to stand at £121, while for over-50s it rose by 3.6% (albeit to a slightly lower average of £117).

Prices have remained virtually unchanged over the last three months, edging up by just 0.2% – helped by the mild winter, which meant few claims for storm damage – but the annual rise will be less than welcome, particularly with many trying to keep costs under control.

Tax impact

Typically, milder winters result in fewer claims, which generally leads to lower premiums. However, that hasn't been the case this year – claims may have gone down, but prices have still risen over the year, and much of it can be attributed to Government tax rises.

Insurance Premium Tax (IPT) currently stands at 10%, which is already far higher than its former rate of 6%, before the round of rate hikes started in November 2015. Unfortunately, it's set to go up again next week, rising to 12% on 1 June, and consumers will continue to pay the price.

"The benign weather has helped to keep premiums down, although IPT rates have pushed premiums up by 2% in the last 12 months, and we expect premiums to rise further in June when it increases to 12%," said John Blevins, Consumer Intelligence pricing expert. "There is no indication that prices will come down."

Competitive impact?

Unfortunately, it looks like the only way for prices to go is up, but we can at least hope for some form of competition that could help keep them under control. This could come into the foreground with the new renewal rules impacting the sector – when a provider sends a renewal notice, they have to clearly state what the previous year's premium was alongside the new price, so customers can instantly see whether they're getting a better (or worse) deal.

It's hoped that this will encourage providers to keep premiums in check in an attempt to avoid losing business, therefore enhancing competition and hopefully leading to better prices. However, you still need to shop around – even if your provider doesn't ramp up your premiums too much, it's always worth seeing what else is out there, because you never know if you could get a better deal if you don't take the time to look.

Start the process by using our quote tool to compare home insurance premiums and see if you can make some savings, with or without the tax hike.

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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