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Car insurance premiums spike upwards

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The new Insurance Premium Tax rate, which was introduced by the government at the start of last month, has seen car insurance costs jump according to research from Consumer Intelligence.

Average annual best buy deals have increased by 10.9% to £696 in the year to November, with prices increasing across all age groups.

The over-50s are the worse affected witnessing average increases of 16.4%, with their typical premium jumping to £279. For those aged 25 to 49, prices have risen 12.8% to a typical premium of £498.

Meanwhile after several years of falling premiums, average prices for the under-25s rose in the year to the end of November, jumping 1.5% to £1,680 according to The Consumer Intelligence Motor Insurance Index.

The Insurance Premium Tax was increased in the Summer Budget from 6% to 9.5% and is estimated to raise nearly £1.5bn and increase prices for motor, breakdown, home, buildings, pet, private medical and mobile insurance.

Ian Hughes, chief executive of Consumer Intelligence, said: “The rise in Insurance Premium Tax is having a massive immediate impact on pricing across the market and the annual increase of 10.9% is substantial.

“Customers need to ensure they are receiving the best value for money from their insurer and many are likely to switch in response to premium rises which are generally nothing to do with insurers.

“The biggest concern is that prices are rising again for under-25s after years of cuts and they should start looking at ways of limiting rises such as black box technology.”