More than a third (36%) of motorists would be encouraged to replace their current petrol or diesel vehicle for an electric model if the 12% Insurance Premium Tax were to be removed on car insurance for electric vehicles, according to new research from The Green Insurer.

Removal of Insurance Premium Tax for electric cars could encourage drivers to switch

More than half (52%) say it would not encourage them to make the switch, while more than one in 10 (11%) respondents already drive an electric or hybrid vehicle so would potentially benefit from reduced car insurance premiums. The Insurance Premium Tax (also known as IPT) is a tax that’s added to all general insurance premiums and is set and controlled by the Government. In the last decade it has doubled from 6% to 12%, and it raised £8.15 billion for the Government last year.

The potential to reduce car insurance premiums on electric vehicles may prove a financial incentive to some motorists who have concerns about the affordability of electric cars. The survey findings also reveal that 60% of motorists cited the higher cost of EVs compared with petrol or diesel models as a reason for not considering an electric or hybrid vehicle for their next car purchase. Other financial-based reasons for not making the switch to an EV include the future cost of replacing the battery (52%); concerns around the cost of servicing (34%) and a belief that electric car insurance premiums could be higher (23%).

Paul Baxter, CEO, The Green Insurer, said: “Labour’s commitment to reinstating the 2030 ban on the sale of new petrol and diesel cars is laudable, but it’s also clear that there remains a real need to make EVs a more affordable choice for many drivers.  Earlier this year we conducted research that revealed 62% of UK adults were supportive of a move to reduce insurance costs for those drivers who are opting to drive greener vehicles.

“Our latest findings indicate that lower insurance costs would also encourage and incentivise some motorists to make the switch from traditional petrol and diesel vehicles to EVs.  We acknowledge that the idea of reducing some of the revenue generated from Insurance Premium Tax may be unpalatable in the current economic climate, however we are convinced that more short-term action such as this is needed to help accelerate EV take-up, which is in line with the new government’s goal to combat climate change.”