Recent figures have shown that a 3.5 per cent increase in insurance premium tax (IPT) has led to the average cost of a home insurance premium rising 3.1 per cent in the last three months.
This represents an average price increase of £119, following the introduction of a higher IPT last November, which is a tax on insurance companies.
IPT increased from 6 per cent to 9.5 per cent, after Chancellor George Osborne announced his intention to raise it in his Budget last year.
Approximately 50 million policies are expected to be affected by the change to IPT, which leads to the cost of products such as car insurance, home insurance and travel insurance to increase.
The Association of British Insurers’ (ABI) is calling for the Chancellor to refrain from increasing IPT further, saying: “IPT should not be seen as a soft touch tax to raise revenue as any increase leads to a further financial squeeze on millions of households and businesses who have done the right thing and taken out insurance.”
Despite the recent rise in premium costs, they are 9.5 per cent cheaper than they were in 2014. However, experts predict that this gap could be swiftly reduced if the fast rise in premium costs continues.
Ian Hughes, of Consumer Intelligence, said: “Unfortunately the only way is up for home premiums following years of price cuts driven by a big reduction in burglaries, and fewer claims for flood and storm damage, thanks to recent milder weather.”