Households are paying extra £67 on the price of insurance premiums due to a tax “hidden in plain sight”, experts have claimed.
The Association of British Insurers (ABI) are warning Britons of the Insurance Premium Tax (IPT) which the group claims “hits the poorest hardest”.
This is charged to most general insurance policies including home, pet, private medical care and motor.
Based on the ABI’s calculations, the tax adds an extra £67 to the cost of the average price paid for motor insurance.
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Households are being hit with a "hidden" tax on insurance payments
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While the “hidden” tax is levied on insurance companies, this is often passed onto customers with poorer Britons more likely to be affected, as they spend proportionately more on insurance, the ABI claims.
According to a survey of 2,000 people commissioned by the organisation, 50 per cent of people admitted that they had little or no idea of the impact IPT had on their insurance costs.
Furthermore, two-thirds of individuals polled have little or no knowledge of the “hidden in plain sight” tax.
Ahead of next week’s Budget, the ABI is urging the Government “cut IPT now” amid the cost of living crisis.
Furthermore, the group has created a mascot named Snippy to promote its cause further.
Mervyn Skeet, the director of general insurance policy at the ABI, called on policymakers to “unmask this tax” to save Britons more money.
He said: “This tax hits the poorest hardest because they typically spend more on insurance, such as home and motor cover, as a proportion of their income.
“There 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 buying insurance. We should cut IPT now.”
The ABI has created a mascot called Snippy to promote its cause
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Motor insurance costs are £67 more on average
GETTYA Treasury spokesperson said: “Insurance premium tax, which contributes over £7billion towards vital public services, forms just one part of the overall cost of insurance and the extent to which it is passed on to customers is a decision for insurers.
“Other factors affecting the price of insurance include the level of competition in the market.”
This is not the first cost that insurers have highlighted as contributing to existing cost of pressure concerns.
Other levies being pushed onto households include the rising cost of premiums which have been hiked due to the increase in price for raw materials and labour.