Two-thirds (67%) of people have little or no knowledge of tax which is “hidden in plain sight”, according to the Association of British Insurers (ABI).
Insurance premium tax (IPT) applies to most general insurance policies including motor, home, pet and private medical insurance.
It is likely to hit the poorest the hardest as they spend proportionately more on insurance such as home and motor cover, the ABI said.
IPT is a tax levied on insurers, but it is passed on to customers through the cost of their policies.
NEWS | Snippy says: #CutIPT ✂️
We've created Snippy to highlight that people shouldn't be penalised by taxes for doing the right thing by taking out insurance. A cut in IPT will help hard pressed households and businesses.
Share if you agree. #CutIPT. https://t.co/hnbqe91uQN pic.twitter.com/t5L03MVRUO
— ABI (@BritishInsurers) February 29, 2024
The ABI commissioned a survey of 2,000 people by OnePoll, which also found that 50% of people said that they had little or no idea of the impact IPT had on their insurance costs.
This is despite the fact that the tax now adds an extra £67 to the cost of the average price paid for motor insurance, according to calculations by the ABI.
To underline its campaign calling for a cut in IPT, ahead of next week’s budget, the ABI has created a mascot named Snippy.
Mervyn Skeet, director of general insurance policy at the ABI, said: “It is high time we unmask this tax which penalises people and businesses for being responsible.
“This tax hits the poorest hardest because they typically spend more on insurance, such as home and motor cover, as a proportion of their income.
“There has never been a better time for the Government to show its support to the millions of homeowners and businesses who do the right thing by buying insurance. We should cut IPT now.”
A Treasury spokesperson said: “Insurance premium tax, which contributes over £7 billion towards vital public services, forms just one part of the overall cost of insurance and the extent to which it is passed on to customers is a decision for insurers. Other factors affecting the price of insurance include the level of competition in the market.”
Insurers have previously highlighted more general cost-of-living pressures which have also been pushing up the costs of premiums, including rising costs for raw materials and labour when repairs are required.