But prices will not actually fall and RAC director Mark Godfrey described the increase in insurance premium tax
as a "slap in the face" for motorists.
But with obligatory insurance premium tax
set to rise from six per cent to 9.5 per cent in November, premiums may still increase.
The AA is calling for Chancellor George Osborne to think again over the increase in insurance premium tax
announced in the Budget
The companies are protesting about changes in the law which forced them to charge 17.5 per cent insurance premium tax
(IPT) on warranties or insurance policies sold to cover electri cal goods - such as fridges or televisions.
Insurance premium tax
, slapped on 50 million policies, will rise to 10%, following the jump from 6% to 9.5% last November.
Revenue in their insurance arm sank 10.9 per cent as the AA warned the Government's insurance premium tax
from November would "add considerably" to insurance prices.
Chancellor George Osborne announced in last month's summer budget that insurance premium tax
will be increased from 6% to 9.5% from November.
For the past year, insurance sold as part of a holiday package has come with a 17.5 per cent insurance premium tax
, but in contrast travel insurance bought direct only had a four per cent tax levy.
The silver policy costs pounds 39 plus five per cent insurance premium tax
and covers an excess of up to pounds 500.
Despite premium reductions, and paying policyholders' insurance premium tax
, income was virtually unchanged at pounds 321 million thanks to continuing sales growth.
There was further cheer for motorists with the decision not to increase insurance premium tax