Car insurance up £100 a year because of George Osborne’s premium tax, AA says

The hike marked the biggest increase in insurance since 2010

The average cost of car insurance cover has risen by more than £100 a year thanks to a so-called "stealth tax" introduced in George Osborne's summer budget, according to the AA.

The AA’s car insurance index showed that the average premium rose 10 per cent in three months and 20 per cent in a year to £625.70. That's an increase of £105.64 in a year.

The hike marked the biggest increase in insurance since 2010.

The AA said an increase in the rate of Insurance Premium Tax from 6 per cent to 9.5 per cent was behind the added cost to the driver.

George Osborne was accused on introducing a “stealth tax” when he slipped higher insurance premiums into his summer budget.

It has affected around 7.3 million policies since coming into force in November and is estimated to earn the Treasury more than £8bn by 2021.

Michael Lloyd, director of AA insurance, said that made up personal injury claims were pushing up premiums for all.

“The UK suffers the unenviable reputation for being the ‘whiplash capital of Europe’ with the number of claims continuing to pile in, encouraged by vigorous cold-calling claims firms,” Lloyd said.

The AA is taking a harder line against false claims including everything from organised crime to opportunistic attempts to rip off insurers.

The Government is backing the effort with new legislation that should curb fraudulent injury claims. The AA said that a tougher line on false claims should bring down insurance premiums.

Some 11 per cent of drivers think it is acceptable to make an insurance claim after a collision, even if no injury was sustained, according to an AA survey.

“It’s this acceptance that it’s OK to defraud insurers that has become endemic.  It is stealing and it affects the premiums paid by your friends, your family and your colleagues – those that most wouldn’t dream of defrauding,” Lloyd said.

But he pointed out that the Insurance Premium Tax was the main reason that premiums had increased so dramatically over the year.

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