With the subordinate rate of insurance payment tax upped to 6% and the higher rate, which covers travel insurance hitting 20%; clients face further hikes in insurance bills. The measures are expected to raise £455m in the first year.

British IPT still remains squat by European standards, where the tax is habitually equal to VAT, and the experts predict that the increase could have been even worse. The current UK rates are 5% and 17.5%.

Though the industry reacted with resentment to the increases saying they reprimanded rational consumers but Car insurance premiums have been steadily increasing over the last year, which now has started to tail off.

"A direct tax increase for the vast majority of people who sensibly protect themselves and their families with insurance. This is regrettable and could have serious unintended consequences if it puts off consumers from protecting their homes, cars, holidays and everyday living", was how the Association of British Insurers described the IPT rise as.

From £839 to £846.99 for the average household, the ABI said that a 1% increase in IPT would mean an increase of £7.99 per year in premiums.

Eric Galbraith, the Chief Executive of the British Insurance Brokers Association, said that this was a tax on protection. The last thing people needed in a financial crisis was a higher insurance bill.