The profits and share prices of the country’s major insurance companies are booming as they impose ever-higher premiums on customers.

But it’s not just the insurers that are reaping the rewards of this premium bonanza — the Government is also rubbing its hands in glee. 

Figures released by the Office for Budget Responsibility (OBR) — in response to the Chancellor of the Exchequer’s Budget — show that the taxes the Government is generating from insurance premiums are currently higher than from much despised inheritance tax.

The current revenue from insurance premium tax (IPT) levied on sales of most types of insurance cover stands at a staggering £8.2 billion a year — £0.6 billion more than the tax raid on family inheritances, and not far behind the tax obtained from tobacco sales (£8.8 billion).

In very simple terms, the bigger premiums that insurers charge their customers, the greater the Government’s tax-take. 

Stealth grab: The taxes the Government is generating from insurance premiums are currently higher than from much despised inheritance tax

In the tax year ending April 2023, IPT receipts totalled £7.5billion while ten years ago, in the tax year ending April 2014, they were just a tad over £3billion. 

Furthermore, according to the OBR, the annual tax grab from IPT will continue to rise over the next five years to £8.8 billion in the tax year ending April 2029.

It’s a win-win for insurers and the money men at the Treasury – and it is a situation that is beginning to anger pressure groups representing the elderly and the financially challenged.

They ALL believe the regressive tax is unfair on those with low incomes and stretched household finances. 

Some also passionately argue that the Government has deliberately turned a blind eye to rampant insurance premiums because higher prices mean a greater tax-take.

IPT is currently charged at 12 per cent on mainstream policies such as household, motor, private medical and pet cover. Some covers, such as travel insurance, attract a 20 per cent charge. 

Rather than absorb the tax themselves, insurers automatically add it on to customers’ bills.

Insurances that are exempt from the tax include health policies such as life cover, critical illness cover and income protection, too.

Although more than four in five households pay the tax, two thirds of people have little — or no — knowledge of it, even though it is spelt out in documents they receive when they take out or renew cover.

The Association of British Insurers (ABI) has dubbed it the country’s ‘hidden-in-plain-sight’ tax.

The ABI hoped that Chancellor Jeremy Hunt would cut IPT in last week’s Budget, arguing that the tax ‘penalises people and businesses for being responsible’.

It even designed its own campaigning ‘mascot’ Snippy (a pair of scissors with eyes) to press for the cut. But Snippy failed to win over Mr Hunt. 

Yet, in the wake of the Chancellor’s Budget, it hasn’t stopped a glut of financial experts from still calling for the tax to be revamped or lowered — sooner rather than later.

Public purse: The current revenue from insurance premium tax levied on sales of most types of insurance cover stands at a staggering £8.2bn a year

James Daley, director of money campaigning group Fairer Finance, says that now is the ‘right time’ for the Government to look at changes to IPT.

He told Money Mail yesterday: ‘A growing number of people are struggling to afford insurance cover, particularly car insurance which is mandatory.

‘People rely on their car to get to work, shop and take children to school. I think it’s down to the Government to take action to support struggling families and pensioners — and cuts to IPT are an easy way to do that.’

The latest data from comparison website Confused.com shows that the average cost of car insurance is now £995 — 58 per cent higher than a year ago. 

Prices, the firm says, are at their highest level since it started compiling data 18 years ago. Both the young and old are bearing the brunt of this surge in premiums.

Mr Daley’s view is shared by Ian Hughes, of insurance consultancy Consumer Intelligence. ‘IPT is a tax on some of the most vulnerable members of society — those who are young or who have had insurance claims and are now paying more for cover,’ he says. 

‘There must be a more equitable way for the Government to raise cash.’ Dennis Reed is director of Silver Voices, a campaign group representing the elderly. He does not mince his words. 

‘It is shocking that the taxman is reaping the financial benefits of the rapacious gains currently being made by insurers,’ he told Money Mail.

‘Instead of smugly pocketing these tax revenues, the Government should be clamping down on the unjustifiable hikes in premiums being imposed on many elderly people, especially those who drive well into their 70s.’ 

He added: ‘The costs of all forms of insurance are becoming prohibitive and leaving vulnerable people financially exposed. This issue needs to be addressed, even if it means less revenue for the Treasury.’

A regulatory crackdown on home and car insurance pricing was launched just over two years ago by the Financial Conduct Authority (FCA). 

The aim was to ensure loyal customers no longer paid more for their policy at renewal than someone buying identical cover from the same insurer for the first time. 

Driving costs: The latest data from comparison website Confused.com shows that the average cost of car insurance is now £995 — 58% higher than a year ago

Although it said the move would save policyholders £4.2 billion over the next ten years, all the evidence so far suggests otherwise.

Over the past year, average premiums for home and car insurance have leapt by 41 pc (according to Consumer Intelligence) and 58 per cent respectively — resulting in record amounts of IPT flowing into the Treasury’s coffers.

As Money Mail has repeatedly highlighted since the FCA’s rules came in at the beginning of 2022, the only way most policyholders have been able to keep insurance costs vaguely under control is by shopping around — or trimming the breadth of their cover.

The insurance industry’s rude financial health was highlighted six days ago when Admiral Group reported 2023 profits of £443 million, a 22 per cent increase on the year before. Admiral’s UK brands include Diamond, Elephant and Veygo. 

The numbers prompted investment bank Berenberg to paint a rosy future for the insurer, forecasting a step up in profits over the next two years to about £760 million.

Shares in Admiral, a FTSE100-listed company, have now risen 43 per cent over the past year. 

Rival Direct Line — a group comprising insurance brands Churchill and Privilege — has also attracted bid interest from Belgian rival Ageas.

IPT was introduced 30 years ago by John Major’s Conservative government. The initial levy was just 2.5 per cent, so an annual premium of £100 would attract a tax charge of £2.50 and an overall bill of £102.50.

B ut successive Chancellors of the Exchequer since 1994 have ratcheted up the cost. The current 12 per cent standard rate was introduced in January 2017 while the 20 per cent higher rate band came in at January 2011.

It applies to travel insurance, electrical goods cover and car insurance that is bought through a dealership.

Although all the experts contacted by Money Mail back a reduction in IPT on fairness grounds, some believe it will be a hard task to achieve.

As one said: ‘I want to support consumers paying less for insurance through the abolition of IPT, but I can’t hear anyone suggesting how this Government — or for that matter the next one — finds the £8 billion a year it would cost.’

The Treasury said it kept all taxes under review, but reform leading to any loss in tax revenue would have to be fiscally balanced to maintain economic stability.

It added: ‘Insurance premium tax, which contributes £8 billion a year 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.’

• Do you think insurance premium tax should be scrapped? Email: jeff.prestridge@dailymail.co.uk