Insurance tax increase could add £100 to bills
Families could see the annual cost of their insurance rise by around £100 after a tax increase comes into force today.
Motorists, home owners and pet owners are among those who are expected to see the cost of their premiums hiked.
The standard rate of Insurance Premium Tax (IPT) - the tax paid each time an insurance policy is purchased in the UK - will increase from 6% to 9.5% from November 1, as announced in the summer Budget.
The change will affect 7.3 million car policies, 4.7 million household policies, three million pet policies and three million private medical insurance policies, according to the Association of British Insurers (ABI).
Any of the affected insurance policies with a start date after October 31 will have IPT charged at the new rate.
The ABI has said the changes could mean that, for example, a family with two cars, a pet and medical insurance could see their insurance costs surge by around £100 a year.
According to analysis by AA Insurance, young drivers can expect to see the annual cost of their policy shoot up by more than £40.
It has predicted the average quote for someone aged between 17 and 22 will increase from £1,278 to an "eye-watering" £1,319 after the tax increase.
Janet Connor, managing director at AA Insurance, said it is feared the increase could tempt some motorists to drive without proper insurance.
She said: "Given the number of police cars equipped with automatic number plate recognition (ANPR) technology, uninsured drivers are more likely than ever to be stopped and prosecuted, with their car confiscated.
"To avoid losing their cars, we believe that more drivers will attempt to falsify information to achieve the lowest possible premium. That might include changing age, occupation, even name and address - in fact the only accurate information might be the registration number of the vehicle.
"In that way the vehicle will be recorded as 'insured' on the Motor Insurance Database and will thus avoid being stopped by ANPR-equipped police patrols."
But she said insurers are wise to this scam and such motorists will risk prosecution - and routine police checks will quickly uncover a fraud attempt.
The IPT increase is expected to bring in an additional £8.1 billion for the Treasury by 2021.
IPT was first introduced to the UK in 1994, at a single rate of 2.5%, and the rise will be the fourth to have taken place.