Chancellor’s Insurance Premium Tax hike is “astounding” in light of proposed PI reforms, says APIL

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Philip Hammond’s decision to raise Insurance Premium Tax (IPT) to 12% from June 2017, while also maintaining that reforms to personal injury claims will deliver lower premiums for motorists has been described as an “astounding” by the Association of Personal Injury Lawyers (APIL).

In his first Autumn Statement as Chancellor, Hammond told Parliament that he would implement a third rise in IPT in two years. IPT was first increased to 9.5% from 6% from November 2015 and to 10% from October 2016 by Hammond’s predecessor, George Osborne.

“The insurance industry has a track record of failing to pass on savings made from previous reforms by lowering premiums,” said Neil Sugarman (pictured), the President of APIL.

“These excessive reforms will affect the long-held right of genuinely injured people to claim compensation, taking the common law back to the dark ages. The excuse that they will generate a saving for motorists when those same motorists will almost certainly be forced to pay for the increase in tax simply adds insult to injury.”

Consumer Intelligence estimates the IPT rise will add around £15 a year to the average motor insurance premium of £788 which has already increased 13.5% in a year. Younger drivers will suffer the most with average premiums for under-25s rising by £35 on their current £1,831 premium.

Homeowners can expect to see prices rise by around £2.50 a year on average from the current £123 annual cost of home insurance premium.

Ian Hughes, chief executive of Consumer Intelligence, said: “In one fell swoop the Chancellor has removed much of the supposed financial benefit to drivers from the whiplash compensation reforms announced last week.

“Young drivers will effectively see any reductions they had been looking forward to wiped out as a two point increase on today’s average premiums of £1,831 equates to £35. Once again every homeowner and driver will have to pay more to protect what matters most to them”.

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Marek Handzel

Marek Handzel is the editor of Claims Magazine. Marek welcomes articles, letters, or feedback from readers and can be reached by emailing marek.handzel@barkerbrooks.co.uk