Insurance companies and consumers who want to protect their assets were among the bigger victims of Philip Hammond’s Autumn Statement and they are clearly not happy about it, as Axa branded a further hike in the insurance premium tax from next summer as an “unwarranted attack” on the industry.
To recap, Mr Hammond intends to raise the levy – a tax on general insurance premiums including car and home insurance – from 10 per cent to 12 per cent from June next year.
Amanda Blanc, chief executive of Axa UK, pointed out the move is the third increase in 18 months, calling the latest hike “an unwarranted attack on millions of people simply looking to protect themselves, their families and their key assets”.
“This is a classic case of the Government giving with one hand, in the form of whiplash reforms, and taking with another,” she said referring to Mr Hammond’s pledge in the Autumn Statement to legislate to end the “compensation culture” around such claims – a move the industry welcomes.
“The affordability of insurance is being fundamentally threatened,” she added. “The country is already underinsured and ever rising insurance taxation could have the unintended consequence of making this situation even worse.”
Daniel Lyons, a tax partner at Deloitte, suggests the industry would have been caught off guard by the move, given that the tax had already been raised in the Budget earlier this year. He said:
This will cost the average family – with a house and two cars – an extra £21 a year, bringing their total IPT [insurance premium tax] cost to £126 annually. In less than two years, the IPT rate will have increased by 6%, doubling the rate. This will be unwelcome news for both insurers and consumers.
Simon McCulloch, director of comparethemarket.com, a price comparison website, said:
Our estimates are that, as a direct result of the Government’s increases in IPT, drivers will have to fork out an extra £109 than they paid two years ago to pay for their insurance. We calculate that the average annual motor premium will cost more than £700 going into the new year.