Autumn Statement 2016: Government aiming to reduce car insurance by tackling fraudulent whiplash claims

Households are facing further increases in the cost of their insurance as a tax rate affecting millions of policies is set to be increased next year.

In contrast, the government is planning a crackdown on fraudulent and exaggerated whiplash claims which push up motorists' insurance costs.

From June 1, the insurance premium tax (IPT) rate will increase from 10pc-12pc.

The tax affects the cost of new policies bought by a wide range of insurance customers, including those buying home insurance, motorists, private medical insurance customers and pet owners.

It was increased on two separate occasions after it was introduced in November 2015 when the rate of tax sat at 6pc.

A spokesman for Aviva said: 'You could say this is a tale of two governments. On the one hand the government plans to reduce the cost of motor insurance through whiplash compensation reforms which will save motorists around £40 - £50 a year. On the other hand we're surprised by the announcement to increase the cost of insurance for a third time, which effectively doubles the amount of tax paid on insurance purchases in less than two years.'

Norwich-based insurance firm Aviva employs 29,600 people and the industry as a whole has a strong presence in the Norfolk economy.

The treasury said IPT was a tax on insurers and it was up to them whether and how to pass on costs to customers.

But the British Insurance Brokers' Association said the move would hit the so-called just about managing group of people who need the government's help.