Car Insurance Costs Rocket
Car insurance premiums will be hit hard by a combination of government and proposed EU legislation.
From the 1st June 2017 Government will increase Insurance Premium Tax (IPT) from 10% to 12%, the third increase in eighteen months!
Introduced in 1994 at 2.5%, it then rose to 6% by 2011, doubling to 12% by 1st June 2017.
The Association of British Insurers (ABI) said the average premium is now £462, a 9.3% increase from the previous year, with the under 25's paying at least double or triple this amount.
Based on the average premium, IPT will amount to approximately £110 and even more for the under 25's or newly qualified, who are already finding it financially difficult to maintain their mobility.
This will be a double whammy for the unemployed, whose premiums usually cost more because of the way insurance companies rate different occupations.
In addition, insurance costs are also rising and hence IPT due to the following:-
- Personal injury/whiplash
The ABI says these claims rose 2.3% over the previous year and is now a £2billion industry, adding about £90 to everybody's policy. 1
Despite repeated calls from the insurance industry, government has refused to intervene on this compensation culture.
With so many mostly mandatory aids (like cameras, radar, sensors etc) built into bumpers, a minor bump can push repairs, easily over the £1,000 mark. 2
- Courtesy Cars
Another ruse is the provision by both the insurance companies and third-party accident management companies of "courtesy vehicles". These are nowadays actually supplied on a credit-hire basis at rates typically ten times (i.e., £300+ per day instead of £30 per day) that at which any of the leading car-hire service providers could furnish a comparable vehicle. This adds massively to the cost of every road traffic accident; the costs simply being passed on by the insurers etc to all their customers through inflated premiums. 3
- Other costs
Because a Slovenian farmworker was knocked off his ladder by a farm trailer in 2007, the European Court of Justice has ruled all self-propelled vehicles even those used on private land, must by covered by insurance, eg. farming tractors/ equipment, sit on lawn-mowers, trailers etc. 4
Though in its infancy, it could mean that insurance companies will have to be prepared to pay out on claims, similar to the uninsured driver scheme that the Association of British Insurers (ABI) already operates.
As IPT covers most short term insurances not just vehicles, this will once again increase costs to industry which will be passed on to consumers.
The Alliance of British Drivers condemns yet another unnecessary tax rise.