Millions of people with car, home and pet insurance face seeing their costs increase due to a further tax hike on premiums.
Chancellor George Osborne announced the second increase to insurance premium tax (IPT) within months, taking the rate from 9.5% to 10%.
The effect of both increases will add nearly £50 to the average motor insurance policy for a young driver, the AA warned.
The tax affects policies for cars, households and pets as well as private medical insurance.
The IPT rate was increased as recently as November 1, with that hike making many families' insurance bills around £100 higher typically, according to the Association of British Insurers (ABI).
The November rise saw the tax increased from 6% to 9.5% as a result of the summer Budget.
The Association of British Insurers (ABI) has previously warned that any further hike would be a "raid" on responsible consumers and could even drive some people to cut or do away with their cover.
It said any increase would be felt most sharply by those who pay the highest insurance premiums - including younger and older drivers, households in inner city or high flood risk areas, people with ongoing medical conditions and people with older pets.
The Government said the latest IPT increase will help fund new flood defences and maintain existing ones.
Its Budget documents said that if insurers pass on the cost of the latest rate increase to their business and household customers, the average combined home and contents insurance would increase by £1, and the average motor insurance premium by £2 per year.
Meanwhile, the AA predicted the latest 0.5% IPT increase will add £2.86 to the average motor policy and £6.19 typically to young drivers' premiums.
The AA said that someone aged between 18 and 22 years old will now be paying £49.57 more for annual motor insurance typically, compared with what they would have paid under the 6% IPT rate.
The British Insurance Brokers' Association (Biba) said it is "astonished" at the further increase in IPT.
It said the latest rise means that, year-on-year, insurance buyers have faced an increase in tax of 66.6% since March 2015.
Steve White, Biba chief executive, said: "Whilst we support the additional spending on flood defences we believe that this could have been funded by the projected £1.5 billion annual funds paid to the exchequer as a result in the increase in IPT put in place only last November, which puts an increased burden on policyholders, many of whom are suffering from ongoing flood damage."
The AA had raised fears last week that the tax could be increased to as high as 12.5% - and it warned that drivers should not be treated like "wallets on wheels".
Edmund King, AA president, said: "The Chancellor has listened to our campaign against a 3% hike in insurance premium tax and 0.5% increase is better than expected. Using it for flood defences is helpful but it simply replaces past spending cuts and targeting motorists to pay for flood alleviation is robbing Peter to pay Paul."