Changes to Insurance Premium Tax that came into force in November have been blamed for the biggest quarterly rise in car insurance premiums for five years.
Chancellor blamed for biggest hike in car insurance premiums for five years image
A new report from the AA has revealed that the average cost of car insurance has risen by more than £100 in the last year, with a 10 per cent jump in the cost of cover in the final quarter of 2015 alone.
Experts have called on the Government to do more to deter false whiplash claims in an attempt to bring premiums to a more affordable level. Keep reading to find out more.
Car insurance premiums rise by a fifth in 2015
The AA’s British Insurance Premium Index has revealed that the cost of car insurance rose by more than £100 in 2015. An average comprehensive annual policy for someone who shops around for cover cost £625.70 in the final quarter of 2015 – a staggering 20 per cent (or £105.64 increase) when compared to the same months of 2014.
According to the AA the typical cost of comprehensive cover increased by £59 – or 10 per cent – in the final three months of 2015. This represents the biggest quarterly jump in car insurance premiums since 2010.
The AA blamed the increase in the level of Insurance Premium Tax (IPT) for the rise in cost. The standard rate of IPT increased from 6 per cent to 9.5 per cent in November and affected 7.3 million policies.
Earlier this month a leading insurance comparison website published similar results. Steve Fletcher, head of data services at the website who published the research, said: “Last year gave motorists a tumultuous ride, hitting them with consistent price rises and an increase in Insurance Premium Tax, both of which would have considerably dented their pockets.
“Unfortunately for motorists, we’ve now seen 11 consecutive months with no premium decreases, which would suggest that the trend is likely to continue.
“If this is to be the case, we would expect the average comprehensive cover premium to soon exceed the £858 per year high we saw during 2011.”
Government urged to do more to deter fraudulent claims
The rise in car insurance costs come as the Government considers reforms to reduce the number of fraudulent personal injury claims.
Michael Lloyd, director of AA Insurance, said that these claims – often for whiplash – were continuing to damage the industry, with false and exaggerated claims estimated to add £50 to every policy.
This Is Money reports that the Government is planning reforms to reduce such claims and insurers have pledged to pass on the savings to customers.
Research by AA Insurance in 2015 suggested that one in nine drivers (11 per cent) thought it was acceptable to make an insurance claim for an injury following a collision, even if no injury was suffered.
Mr Lloyd said: “It’s this acceptance that it’s OK to defraud insurers that has become endemic. It is stealing and it affects the premiums paid by your friends, your family and your colleagues – those that most wouldn’t dream of defrauding.
“The sooner new legislation to tackle whiplash claims becomes enshrined in law, the sooner that will be reflected in the premiums quoted for car insurance,” he added.