Experts have called for major changes to how car insurance is taxed to help increase incentives for drivers to purchase electric vehicles.
It comes after reports revealed the Government plans to subsidise loans for electric vehicle purchases, with experts flagging that more support is needed.
Discussions are currently taking place between the Government and car finance firms to expand access to low-interest or interest-free loans for electric vehicles.
One key proposal under consideration would see the Government underwriting private sector loans to reduce monthly repayments, making electric vehicles more financially competitive with petrol and diesel models.
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Experts have called for IPT to be removed to help push drivers into buying an electric car
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But one insurance company has advocated for the removal of Insurance Premium Tax (IPT) on electric vehicles as an additional incentive, with research showing 36 per cent of motorists would consider switching to electric if the current 12 per cent IPT were removed from their insurance.
The Green Insurer's research revealed that 64 per cent of motorists believe the Government should provide incentives for purchasing electric vehicles.
Among current petrol and diesel vehicle owners, 31 per cent plan to make their next vehicle purchase an electric or hybrid model.
A further 34 per cent of drivers indicated they were indifferent to the type of fuel their next car would use, suggesting potential openness to electric vehicles with the right incentives.
Insurance Premium Tax currently stands at a standard rate of 12 per cent on general insurance premiums in the UK. IPT is a tax on general insurance premiums, including car insurance, home insurance, and pet insurance.
A higher rate of 20 per cent applies to certain types of insurance, including some motor vehicle-related coverage.
The tax has doubled since October 2015, with the Association of British Insurers reporting it now adds an average of nearly £100 to motor and combined buildings/contents home insurance policies.
The ABI has recently urged the Government to reduce IPT rates, arguing the tax "disproportionately affects" poorer households who spend more of their income on essential insurance coverage.
For a single person with a car and contents insurance, IPT costs amount to approximately £87 annually, while a couple with two cars and additional coverage could face IPT charges of over £230 per year.
Paul Baxter, chief executive officer of The Green Insurer, said: "Subsidising loans for electric vehicles is a welcome move but it is needed given that sales of electric vehicles are below Government targets and shows more is needed to shift the dial.
"By getting more new electric cars on the road we are building a stock of greener used vehicles for the future. Scrimping on the environment is just something that we cannot afford."
Cost remains a significant barrier to electric vehicle adoption, with 60 per cent of motorists citing higher purchase prices compared to conventional vehicles as a key concern.
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Insurance Premium Tax is a levy applied to car insurance in the UK and currently stands at 12 per cent
GETTYNearly a quarter of drivers (23 per cent) worried that insurance premiums for electric vehicles could be higher than those for petrol or diesel cars.
Mervyn Skeet, the ABI’s Director of General Insurance Policy, added: "Insurers are doing all they can to offer competitively priced insurance, despite facing some substantial increases in costs outside of their control.
"Now has never been a better time for the government to show its support to the millions of homeowners and businesses who do the right thing by protecting their families and livelihoods against sudden financial shocks, than to reduce Insurance Premium Tax."
