There’s bad news for those of us who with the Christmas spending spree well and truly behind us now need to set out our finances for the coming year - the Association of British Insurers tells us that 2015 saw hard-pressed drivers again being squeezed financially when it comes to their insurance.

It said that, in the last three months of the year alone, the average motor insurance premium jumped by 7%, and ended 2015 at £430.

That took the increase in the cost of a typical annual policy to 8% for the year as a whole, and a large chunk of this rise was accounted for by a hike in Insurance Premium Tax.

A charge made by the government and payable on all policies, this rose from 6% to 9.5% at the beginning of November - and in many cases, this could easily have offset any savings made in family budgets as a result of the price of petrol dropping to under £1 a litre.

Osborne Urged Not To Raise Tax Further

The ABI has also urged Chancellor George Osborne not to raise the tax again in his budget later this month, pointing out that just a 1% rise in the tax would cost businesses in the UK nearly £150million.

"Insurance Premium Tax is a tax on businesses that will hit companies that do the right thing”, said James Dalton, the ABI’s Director of General Insurance Policy.

He added that, unlike VAT, firms could not reclaim any element of their IPT payments, and as a result some may try to offset this extra expense by cutting costs elsewhere. The increase already levied would be likely to cost British businesses in the region of £500million, Mr Dalton added.

"On top of all this a rise in IPT hits demand by reducing consumer spending power,” he said.

Now’s The Time To Beat The Taxman

If all this sounds too gloomy for you, why not take up the suggestion of the government’s own Money Advice Service, and see whether any of its tips for bringing down your premium can be applied to your policy?

In total, it suggests a long list of ways of cutting motor insurance premiums, quite a few of which are achievable by almost anyone, including:

• Paying in one lump sum instead of spreading the cost through monthly instalments - this typically adds an extra 5-10% to premiums, but according to consumers’ champion Which? can load up to an extra 40% onto the annual cost of a policy, making it more expensive than paying by credit card.
• Checking your policy wording carefully to make sure that you aren’t paying for any cover which you haven’t asked for or don’t need. For example, some policies may include added breakdown cover. But if you’re Driving a car that’s under three years old, it’s very likely that you’ll already have this included with your manufacturer’s warranty.
• Making sure that your policy reflects your actual annual mileage. Your insurance company might assume that you’re an ‘average’ motorist covering about 12,000 miles a year, and set your premium accordingly - unless you tell them otherwise. So if you’re only doing 6,000 or so, the chances are you could get a reduction.
• If you haven’t had an accident for a few years, seeing whether you’re entitled to a no claims bonus, double-checking whether this is applied to your existing policy, and ensuring that you tell other companies about this when you ask them for a quote.

It isn’t just your policy you should check if you want to maximise your chances of making a worthwhile saving. Taking a close look at your driving routine and how you treat your insurance policy can have a big bearing on how you’re perceived as a risk by insurers. So a few tips can be worth bearing in mind, including:

 

• If you have one, clear out your garage so that you can actually use it for parking your car in - this is sure to save you a proportion straight off the top of any premium quoted.
• Be an Average Joe in terms of your choice of car. Driving one of the most popular makes and models will cut your insurance premiums, as these are cheaper to repair thanks to parts being easier to get hold of.
• Avoid making claims for every little incident, especially if you have a high excess on your policy. You probably won’t get this money back if you’re involved in an accident for which you’re to blame, and it’s likely to leave you facing a higher premium at your next renewal.
• Have an approved alarm or immobiliser fitted if you haven’t got one already - and if you have, check that it meets what’s known as the Thatcham approved standards, as this is sure to make your car less attractive to would-be thieves.
• Take an advanced driving test, as many insurers recognise this as proof that you’re keen to drive safely and will offer a discount on your premium as a result.
• Finally, once you’ve got all the quotes you can handle, go back to your current insurer and let them know if you’ve found cover for less, and they might be able to match the price - after all, they should be keen to keep your business.

This isn’t a completely exhaustive list, but the main lesson is that you shouldn’t simply accept the premium your current insurer is asking you to pay.

Many of these companies profit hugely through ‘inertia’ - the unwillingness of customers to shop around for a better deal, probably because they think it will be too much hassle to change insurers - although that situation has changed to some extent with the arrival of so many price comparison websites.

But with premiums on a constant roller-coaster, you should never just accept what your existing company asks you to pay without at least trying to find a cheaper quote.

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