Breakdown insurance on second-hand cars and insurance on car and TV or video hire will also be cheaper if bought separately.
And holidaymakers will find it cheaper to buy their compulsory travel insurance from a specialist broker like WorldCover Direct or an insurer like Norwich Union instead of the travel agent from next April, when the special rate of 17.5 per cent insurance premium tax (IPT) takes effect on insurance and warranties sold by retailers and travel agents as a package with goods and services.
Specialist insurance brokers claim already to charge around pounds 18 per person for a typical two-week holiday package in the Mediterranean, compared with an average pounds 25-pounds 28 a tour operator would charge.
The tax changes have been imposed because stores and travel agents have been saving money at the taxpayer's expense by reducing the price of goods and holidays, which are liable to VAT and putting up the price of the insurance they sell, which is not liable to VAT.
From April a penal IPT rate will make up the VAT the Chancellor has been losing.
But sadly it does not mean any of us will be better off. Specialist insurers will have to charge 4 per cent IPT instead of the current 2.5 per cent, and stores like Dixons selling consumer durables as well as travel agents selling package tours may well try to increase the prices of the goods and holidays to make up for the commission that they will lose on warranties or travel insurance sales.
Travel agents are hoping to negotiate a transition period from next April so that existing deals they have done with insurance companies and syndicates can be honoured at least for the lifetime of those 1997 holiday brochures which have already been printed. But it can only delay the imposition of the higher rate on travel insurance sold with the holiday.
Retailers may not stop selling warranties, however, because they assume some customers will still neither know nor care what they are charged.
Travel agents may not abandon selling warranties or holiday insurance altogether because they argue holidaymakers may still be willing to pay for expensive insurance to qualify for a 12-15 per cent discount on the holiday itself.Reuse content