The rate of Insurance Premium Tax (IPT) has doubled in little more than 18 months, with the latest rise in June taking it to 12%, up from 6% in November 2015. It applies to all kinds of consumer insurance products, so it was always expected to have an impact
on the prices we pay – which is exactly what's happening, with new figures showing that home insurance premiums are rising at the fastest rate for three years.
The figures, from Consumer Intelligence, reveal that typical home insurance costs rose by 7% in the year to July, more than double the rate of inflation (2.6%), to stand at an average of £131. This follows strong premium rises in June, too, with both months seeing record premium increases, showing that the Government's tax hikes are rapidly taking effect.
The figures further revealed that prices are rising fastest for over-50s householders, who are seeing an average price rise of 7.6%, and similarly, customers who have older homes are paying more for their insurance than owners of newer properties (those built after 2000). Location comes into it, too, with average premiums in London being the highest at £159, some 37% more expensive than typical premiums in the South West (£116).
While much of it can be attributed to the IPT increases in recent years, the report points out that Brexit could also be having an impact, as the weaker pound drives up the cost of imported materials and therefore increases the cost of repairs. The growing trend for extensions could also be having a part to play, with Consumer Intelligence noting a particular rise in claims for leaks from new bathrooms.
It's worth pointing out that home insurance customers are still paying less for their premiums than they were in 2014, but this may not be the case for long. As John Blevins, Consumer Intelligence pricing expert, explains: "The home insurance market is very competitive so it is unlikely prices will rise as quickly as in the car insurance market unless bad weather claims increase, but it is [nonetheless] likely we will see a slow and steady rise in prices in line with inflation and the value of the pound."
So what can you do to stop your premiums from rising? Well, while prices are generally on the up across the market, providers are still competing, which makes it vital to compare home insurance quotes when it's time to renew. Use our home insurance quote tool to get started, and see if you can avoid the price hike.
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.