Major tax changes could help drivers save £100 a year on massive car insurance prices
The ABI is calling for changes in the Autumn Budget next week
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Experts are demanding for the Government to make urgent tax changes to ensure drivers are charged a fair price for their car insurance.
The Association of British Insurers (ABI) has urged Chancellor Jeremy Hunt to overhaul rules in the coming Autumn Statement next week.
The organisation has targeted the insurance premium tax (IPT) which adds almost £100 to the annual cost paid by consumers for motor and home coverage.
It argued that the Government cutting this tax would help millions of households and businesses adapt to the quickly rising insurance costs.
WATCH NOW: Car insurance prices continue to rise
IPT is a tax levied on insurers, but the overwhelming majority of companies pass the cost onto the customers as it contributes to the total cost.
According to the ABI, the tax equates to an added cost approaching £98 per year for motor and home insurance.
IPT also applies to pet, travel and private medical insurance, with standard rates doubling by 12 per cent since October 2015.
The trade association added that the taxes are likely to hit the poorest the hardest who tend to spend more on insurance.
Mervyn Skeet, the ABI’s director of general insurance policy, called on the Government to enact changes to ensure drivers are not being hammered by unfair price hikes.
He said: “Insurers are doing all they can to offer competitively priced insurance, despite facing some substantial increases in costs outside of their control.
“Now has never been a better time for the Government to show its support to the millions of homeowners and businesses who do the right thing by protecting their families and livelihoods against sudden financial shocks, than to reduce insurance premium tax.”
With car insurance, insurers are forced to pay for a rental car when someone’s vehicle is being repaired, with the sophistication of modern vehicles also increasing prices.
According to Confused, the price of car insurance has reached its highest on record, with drivers paying an average of £924 for their cover.
Shockingly, car insurance prices have increased by £338 in just 12 months, with a 19 per cent jump in the last three months alone.
A couple with two cars, their own home, a pet and travel cover could be forced to pay around £231 every year solely in insurance premium tax.
The ABI said the Government made a staggering £7.45billion from IPT last year.
Drivers have consistently been told to make changes to their insurance habits, including shopping around for their policy when their coverage is coming to an end.
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Drivers could be paying an average of almost £1,000 for their car insurance
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Some motorists could be losing out on hundreds of pounds every year if they do not look for the cheapest deal that accommodates their driving needs.