June 23, 2010 16:30 ET

'Compare Car Insurance' Say Experts Following Budget Reading

IPSWICH, UNITED KINGDOM--(Marketwire - June 23, 2010) - The Emergency Budget provided gloomy reading yesterday and brought with it some drastic increases. For Insurance Premium Tax (IPT) however, the news is that it will only rise by 1%. This is not quite as eye-watering as it could have been, but is still significant for motorists on top of recent increases and means that it is worth shopping around to compare car insurance deals.

George Osborne announced in his outline of things to expect that in line with the increase in the VAT rate, the higher rate of IPT will increase on 4th January 2011 from 17.5 per cent to 20 per cent, while the standard rate will increase from 5 per cent to 6 per cent. This will supposedly help to raise £0.5 billion a year by 2014-15 to help repay the deficit.

According to the AA Insurance Premium Index, the average 'shoparound' premium accelerated steadily over 2009, adding more than 22% to typical comprehensive car insurance quotes. The latest report from the first quarter 2010 shows that the average premium is now £616.62

A spokesperson for Tiger, commented: Whilst Insurance Premium Tax (IPT) has only risen from 5% to 6% this will still add about £6 to the average car insurance premium. This coupled with the significant increases in premiums that we have seen so far in 2010 makes it even more important that motorists shop around and compare car insurance to get the right level of cover at the best possible price".

Although the rise is not great news for motorists, there were concerns prior to the Budget that the lower rate IPT could be increased in line with travel and extended warranty protection, which was at 17.5% (now increased by 2.5% to 20%). However, it is still an increase, and will need to be considered at the point of renewal for all drivers. On the upside petrol prices have remained the same.

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