The ABI has attacked government plans for a levy on household insurance. The levy, proposed by Home Secretary David Blunkett, would increase state support for victims of crime.

But the ABI said a levy on household insurance would be costly and inefficient. ABI head of general insurance John Parker said: "More than one in five households still don't have contents insurance so putting up the cost is the last think the government should be doing. The competitive market for insurance has kept premiums down in recent years; this is not a good time for the government to be putting them up, particularly as Insurance Premium Tax is already delivering over £2bn for the Treasury."

It is understood that the proposal does not have Treasury support. Treasury chief secretary Paul Boateng said in a letter: "I would find it difficult to justify such a levy, given the insurance companies have no liability for the criminal actions of others and there is no direct link between many of the policies they sell and the outcomes to be compensated for."