In the summer budget, the Chancellor announced a rise in insurance premium tax (IPT) from six per cent to 9.5 per cent, starting on the 1st November. And it seems that this is likely to have a very unfortunate effect: according to two recent studies, some people are now going to buy less insurance.
It’s been estimated that this hike in tax will add between £10 to £12 to the average buildings and contents policy, which may be enough for some consumers to downgrade their policies or cut cover altogether. One study by Consumer Intelligence showed that over one quarter (27 per cent) would cancel policies or reduce cover. This was supported by a study of 1000 consumers undertaken by UNA, which reported that 25 per cent of people living in London are now buying less protection – despite the fact that the rise won’t take place until November.
But some good news has come from another survey by Consumer Intelligence. This showed that more than half of consumers who phone their insurer to query their renewal quote were then offered a cheaper deal. Four in 10 made a saving of more than a tenth while the rest achieved a more modest saving.
So it shows it’s worth haggling – but as always with the same caveat as we always give: make sure the cover you’re buying gives you the protection you expect if you have to make a claim. If any deal you’re offered changes your cover then you need to fully understand the implications of this.
But some cover is better than none, so our advice on the imminent hike in IPT is to consider the impact of not having insurance if something were to happen. Ask yourself if paying an extra tenner a year would actually be money well spent for the peace of mind of knowing you’ve got protection.