Customers could ditch insurance if IPT is hiked again, ABI warns
Consumers may risk going without insurance altogether if the Chancellor imposes a further tax hike on premiums in the Budget, insurers are warning.
Fears have been raised that George Osborne is poised to make his second increase to insurance premium tax (IPT) in six months.
The tax affects millions of insurance policies - including those for cars, households, pets and private medical insurance.
The tax was increased as recently as November 1, making many families' insurance bills around £100 higher typically, according to the Association of British Insurers (ABI).
The ABI 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.
Some areas of the country would also be harder hit than others - and drivers in the North West of England could face the biggest rises in the cost of their car insurance - with an increase of around £40 a year - according to the ABI.
James Dalton, director of general insurance policy at the ABI, said: "Another increase in insurance premium tax would be a raid on the responsible that laser targets those who do the right thing. It will hit those on low incomes and increase the risk that some people reduce their cover or stop insuring altogether."
The tax was increased from 6% to 9.5% in November 2015 as a result of the summer Budget.
The AA said last week that it believes the tax could be ramped up again, by three percentage points, to 12.5%.
The AA added that if this happens, it will spell out to its customers on their invoices exactly how much the tax is "squeezing out of them" on their cover.
AA president Edmund King said last week that drivers should not be treated as "wallets on wheels".
The ABI estimates that the November 1 2015 increase to ABI added nearly £13 to the average comprehensive motor insurance policy, more than £10 to the average combined building and contents cover, more than £10 to average pet insurance and more than £40 to average private medical insurance.