Motorhome insurance premiums set to rise
Motorhome insurance premiums are set to rise this year, thanks to the double whammy of an increase in Insurance Premium Tax (IPT) from June 1 and a change in Discount Rates (aka the Ogden rate).
IPT, which is payable to HMRC by insurance companies will rise to from 10% to 12% of any premium from June 1. It is the second such increase in the last year. This rise is likely to be passed straight onto those buying insurance, including motor and travel insurance.
The Ogden rate refers to how compensation is calculated for personal injuries. It is a rate set by the Lord Chancellor and was last changed in 2001. The Ogden rate rise was more than the industry was expecting, as Mohammad Khan, UK General Insurance Leader at PWC, explained: “As a direct result of this change, we anticipate an increase of £50-£75 on an average comprehensive motor insurance policy, with higher increases for younger and older drivers – potentially up to £1,000 for younger drivers (18-22 year olds) and a rise of up to £300 for older drivers (over 65 years old).
"This announcement, on top of the recent increases in insurance premium tax, will make redundant any savings to premiums as a result of the government’s personal injury legal reforms, which were anticipated to generate approximately £40 saving per motor insurance policy.”
The change to the Ogden rate will result in increases in settlements for personal injury claims as it directly impacts the amount of compensation an injured person is entitled to.
For example, according to Allianz, a 30-year-old man so seriously injured in a road traffic crash that he can no longer work and will require nursing care for the rest of his life would, under the previous rate, have been paid a lump sum of £2.79m. Under the new rate, he will be paid £6.325m.
“These government-enforced tax and rating changes will impact on motorhome owners when insuring their vehicles and will affect all specialist motorhome insurers,” confirmed Neil Menzies, Director of Relations at Caravan Guard.
“As always, Caravan Guard will work hard to make sure our premiums remain competitive and great value for money. We also offer a range of significant insurance discounts for the safety and security conscious motorhomer, so owners affected by the increases could save money against their previous insurance premium by switching to Caravan Guard.”
Some motorhome owners have already seen significant increases in their latest renewal premiums and the advice is not to simply accept the rise but challenge it and shop around, as some specialist motorhome insurance companies may look at ways to avoid passing some or all of the increases onto their customers, as Nigel Coppen, Retail and Marketing Director for Vantage Insurance, (which includes Shield as well as Club Care and Crusader under its umbrella), points out: “It's actually an opportunity to speak to a motorhome insurance specialist to secure the best deal for the cover required,” he said. “Many people don't realise the flexibility that proven specialists like us, who have been in the motorhome sector for since 1993, can offer. Working through the cover requirements with a customer, a specialist motorhome insurance provider will be able to see where savings may be possible whilst maintaining the quality of the cover.”
However, as Lesley Coell, Head of Insurance and Financial Services at the Caravan and Motorhome Club, points out: “A tax is a tax and is unavoidable. The effects cannot be ignored or avoided and the insurance industry will have to react to these requirements…The decision for any insurer is whether to absorb the tax increase by reducing the underlying rate, paying over the higher rate of tax and making less margin, or passing the increased cost on to the customer.”