The recent change to Insurance Premium Tax (IPT) comes as a shock to the insurance market with the new budget as they have previously put measures in place to reduce the cost for policy holders to receive adequate insurance.
The increase of 58% will more than likely be absorbed by the policy holders which in turn will increase the price for the general public to be protected. This will be a huge change for those who wish to insure themselves against everyday harm with the market being incredibly competitive and will see that all insurance prices will increase with no chance to shop around.
We are interested to see whether or not insurance companies across the board will keep their pricing matrix the same and add the increase on tax or try to be competitive by reducing net rates to absorb the increase.
We do believe this may be an issue with each company reducing their rates slightly with the increase of IPT which results in the customer paying more for the same product and companies making less in the new budget. The result of this increase can be a shock for those already affected by other areas of the new budget with the younger generation receiving less help towards living costs.
This will result in the new generation putting insurance on the bottom of the list as it has been reported that having insurance on goods is seen as a stressed expense for those on a tight income.
“BIBA response to the rise in Insurance Premium Tax
In response to the rise to 9.5% of Insurance Premium Tax (IPT), BIBA CEO, Steve White, said:
“We are extremely disappointed in this rise in Insurance Premium Tax and will mean insurance will become more expensive for the public as a result. Those hit by this stealth tax will include the 20.1 million households with contents insurance; 19.6 million with motor insurance and 17 million with buildings insurance.
“The Government has been working with the industry to reduce the cost of insurance for consumers – including a summit chaired by the Prime Minister. It therefore seems counterintuitive to be taking measures which will add to the cost – effectively taxing protection.
“We hope the Government will review this rise and correct it in further budgets.”
The increase will also see a strain on employers resources as building insurance, public liability insurance and private health insurance will also go up which may result in a drop in benefits offered by companies for their employees. It has already been reported prior the budget report that the private medical insurance market is unsustainable in its current format.
Many organisations are looking to see a review in this huge increase in tax that will affect the majority of the population which in the end result is removing money and protection away from the ones that need it most.
We for one would welcome a review on the IPT to reflect the needs of the public and industry alike.
This will be a further shock to the public as we have discovered that MP’s wages are set to increase by 10% to apparently reflect the current market and inflation rates.
We suspect that each Member of Parliament’s 10% pay increase will cover their 58% increase on Insurance Premium Tax.
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