Janet Connor, managing director of AA Insurance said: “This will hit motorists and home owners hard.
“The contention that falling premiums somehow justifies the tax increase is outrageous.
“It means an additional £17.50 on top of the average quoted Shoparound premium, according to the AA’s benchmark British Insurance Premium Index, and it comes precisely at a time when premiums are beginning to rise once again.
”This couldn’t be a worse message for motorists from the Chancellor.”
The average Shoparound premium at the end of the first quarter of 2015 was £530, having fallen from a peak of £742 at the end of 2011, following a significant increase in the number whiplash injury claims and ‘cash for crash’ fraud. They have not yet fallen back to the £493 which was a typical premium at the beginning of 2010.
Ms Connor adds: “The increase in IPT simply hasn’t been thought through and will have unintended consequences.
“Because of intense competition, new business is usually sold at a loss. This can therefore only put greater upward pressure on premiums as a whole.
“Premiums are beginning to rise again and the additional IPT burden will make insurers think again about their pricing and I would not be surprised to see an overall increase of 10% or more by the end of the year and continuing upward pressure into 2016.
“What’s more, those on the lowest incomes who struggle to pay for car insurance may well be tempted to attempt to drive without cover, undoing much of the good work carried out by the industry to curb this plague.
“Today is a very bad day for car and home owners.”
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