The Chancellor also announced a major review of the regulation of claims management companies, and pledged to cap the charges they can apply to their customers.
The move was met with disappointment from the British Insurance Brokers' Association.
In response to the rise to 9.5% of Insurance Premium Tax, BIBA CEO, Steve White, said:
“We are extremely disappointed in this rise in Insurance Premium Tax and will mean insurance will become more expensive for the public as a result. Those hit by this stealth tax will include the 20.1 million households with contents insurance; 19.6 million with motor insurance and 17 million with buildings insurance.
“The Government has been working with the industry to reduce the cost of insurance for consumers – including a summit chaired by the Prime Minister. It therefore seems counterintuitive to be taking measures which will add to the cost – effectively taxing protection.
“We hope the Government will review this rise and correct it in further budgets.”
Jason Berry, director of sales at Uinsure, commented:
"It was bitterly disappointing to hear George Osborne’s plans to increase Insurance Premium Tax to 9.5%. With IPT currently at 6% this is a massive 58% rise and there is no doubt that the people who will feel the impact are consumers. Insurance will become more expensive in order to accommodate the hike.
"As many brokers and providers will attest it is already difficult to convince clients of the dangers of cutting corners and opting for inferior products to save money. Insurance is always a hard sell as people don’t want to have to fathom a time when they might need it and many consumers make the mistake of thinking a cheap policy ‘will do’. If premiums now have to rise to cover the IPT increase the broker’s job only going to get harder.
"However, it is essential that brokers continue to emphasise the need for quality and the importance of prioritising this over price. Opting for the cheapest policy on the market is false economy."
