June 20, 2010 19:00 ET

Increase in Insurance Tax Could See Car Insurance Premiums Rise By GBP 74(i)

IPSWICH, UNITED KINGDOM--(Marketwire - June 20, 2010) - Concerns have been raised over the emergency budget, which is due to be announced on Tuesday 22nd June 2010, as speculation continues to rise over the new government's plans to increase insurance tax; significantly raising the price of car and home insurance policies. The current insurance premium tax (IPT) stands at five per cent, and covers motor, home and pet insurance. However, moves to align this rate with travel and extended warranty protection, which are taxed at 17.5 per cent, would be a "tax on people being sensible and taking action to protect themselves" according to a spokesman from the Association of British Insurers. The concern is that people could be put off buying the appropriate amount of cover for their needs and find they are not adequately covered in the event of a claim. Insurance lobby groups as well as industry experts have made it abundantly clear that they feel it would be detrimental to individuals as well as small businesses.

A representative from Tiger.co.uk, who provide car insurance quotes from over 100 insurance brands, commented: 'A rise in insurance premiums because of the emergency budget could mean families and businesses risk not being protected, leaving themselves open to having to pay out in the event of any incident that they subsequently find they are not covered for. We would encourage people to shop around and use comparison sites to explore product detail, make sure they are covered for their particular needs and get the best possible price'.

Tiger also stated that if the increase does go ahead, this could mean an increase of £74 on the average yearly premium. (i) The British Insurance Brokers Associations (BIBA) is planning to lobby the Treasury to show they oppose the increase in insurance tax, before George Osborne delivers his emergency Budget on June 22.

BIBA's Chief Executive, Eric Galbraith has stated that a higher tax could discourage the individuals and businesses that need insurance the most, from taking out a policy. This is very dangerous as like Galbraith noted, these are the people who are least likely to have money to fall back on without a policy.

(i) Over 31 million cars on the road in the UK, and 35 million individuals with a full driving licence. 75% of the UK households have at least one car, and a third of those have more than one vehicle.

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