Government changes to policies around car insurance have cost British drivers a collective £7.8bn since 2015, according to new estimates.
Changes to insurance tax premiums and personal injury payments are estimated to have added £208 to the cost of car insurance for every driver in the country, according to figures from comparethemarket.
Since 2015, Insurance Premium Tax has been gradually increased from six per cent to 12 per cent. This tax is levied on all premiums and insurers have passed the repeated rises on to customers, adding an average of £118 to premiums.
In 2017, the Government also announced a controversial change to the Ogden rate – a means of calculating large insurance pay-outs in the event of life changing motoring injuries. The change meant insurers faced paying out more to victims of the most serious accidents, a cost which they have passed onto drivers.
Industry estimates indicated that the annual increase to premiums would be £45 per policy per year. This equates to £90 since the change was introduced in March 2017. However, the change to the rate is now being investigated and could be altered again after complaints that it distorted the market.
Dan Hutson, head of motor insurance at comparethemarket.com, said: “These figures demonstrate the direct impact that government changes have had on the financial health of British motorists. There is little doubt that the IPT rises were seen as an easy way to raise money from British taxpayers, having doubled the tax take from £3 billion in 2014 – 2015 to £6.2 billion in £2018 – 2019, but the impact will have been felt by ordinary people who rely on their car.”
Threat to young drivers
According to comparethemarket figures, the average car insurance premium has risen from £551 in 2014 to £735 in 2018 but for drivers aged 17-24 it stands at £1,281, posing a threat to their ability to afford a car.
A study by the comparison site found that over half (56 per cent) of young drivers found it hard to afford their car’s running costs but 69 per cent relied on having a car to get to work, school or university and more than a quarter said their job would be put in jeopardy if they couldn’t afford to drive.
Dan Hutson added: “The changes to IPT and the Ogden rate have punished those who can afford it the least – the young – many of which need a car to get to their jobs.
“For a long time now, we have been calling for the Government to reform Insurance Premium Tax particularly for young people who faced the largest hikes despite being able to afford it the least. The Government should scrap IPT for young drivers which would help ease the financial burden of car ownership.”