Tax rises have contributed to home insurance premiums rising by £60 annually for the average household, according to new figures.
The Association of British Insurers (ABI) reports that premium costs jumped by 19 per cent in the first quarter of 2024.
This follows a severe winter for weather damage claims but prices remain lower than historic peaks.
Analysts from the UK insurance industry are noting that home insurance prices have skyrocketed due to an increase in claim costs and a period of high inflation.
Claims have become increasingly more expensive due to an insurance tax raid on homeowners with rates rising over the years.
2023 was plagued by bad weather, according to the ABI, with weather-related insurance claims totalled £573million over the year.
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Home insurance premiums are on the rise
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Flooding contributed the most to weather-related damage with the Insurance Premium Tax (IPT) previously being “earmarked” to pay for flood defences by the Government in 2016.
However, the ABI is questioning how successful this levy has been due to flood defence investment “lagging behind”.
Figures from HM Revenue and Customs (HMRC) figures found that IPT receipts hit a record £8.1billion in 2023/24, which is up 9.9 per cent from the year before.
Despite HMRC raking in billions over the years through this levy, issues relating to flooding have persisted since 2016 despite the promise of funding for more defence investment.
Back in 1994, the introductory standard rate of IPT was only 2.5 per cent however this was raised to 10 per cent by October 2016.
As of today, the insurance premium tax is charged at a rate of 12 per cent on homeowners.
In the first quarter of this year, the average home insurance premium paid rose to £375, a sharp increase from the £315 paid over the same time in 2023.
By the end of 2023, storms Babet, Ciaran and Debi caused £352million of damage to homes, the ABI reports.
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Households are paying more as taxes rise
GETTYLouise Clark, the trade association’s policy adviser for general insurance, called for reform in order to protect household finances.
She explained: “The longer we put off vital investment in flood defences, the more that flood damage will ultimately cost the consumer.
“An increase of the tax on insurance policies - IPT - was earmarked by government in 2016 to fund flood defences.
“This tax brings in billions for HMRC yet flood defence investment lags behind.
“There are other important steps we need to consider too, including reform of planning laws to prevent home building on high flood risk areas and a greater focus on climate-resilient properties.”