- Insurance Premium Tax generates revenues of £6.2billion per annum from businesses and consumers
- Firms and households may elect to go unprotected if Insurance Premium Tax Increases
- Calls on the Chancellor to help young drivers seeking motor insurance and businesses facing cyber threats
- Demand that existing annual revenues of £250m generated from Insurance Premium Tax of continue to be ringfenced for flood defence works
The British Insurance Brokers’ Association (BIBA) had highlighted four areas relating to Insurance Premium Tax (IPT) which the Government and the new Chancellor should heed.
The rate of IPT on most insurance policies sits at 12% of premiums, providing Government with additional revenues from hard pressed consumers and businesses of a staggering £6.2billion. This is resulting, particularly in the public and voluntary sectors, in compromises in the amount of protection sought and a reduction in resilience.
Tulsi Naidu, Chief Executive Zurich UK explained:
“There is a string of unintended consequences when there is an increase in IPT: it affects charities, public authorities, businesses and individuals, disproportionately affecting those with higher insurance risks. Our research into the public and voluntary sectors, showed that 9 out of 10 respondents felt that any increase would negatively impact them financially, forcing them to make job cuts or cut budgets elsewhere, while nearly half said it would affect their organisation’s ability to adequately insure itself against the risks they face.”
In light of Zurich’s research BIBA is demanding that the rate of IPT remains frozen for the duration of this Parliament.
Lack of protection
Most worryingly BIBA is concerned that customers may be forced to go unprotected in two key areas. Young drivers, who already face high risk-based pricing and therefore a large tax burden, sometimes find paying for motor insurance challenging. They could be helped in terms of both road safety and affordability by increased use of telematics-based motor insurance. In a similar vein, take up among businesses – especially smaller businesses – of suitable cyber insurance is low. As well as a low perception of the extent of the risks such organisations face, there is a fear that the cost of cyber cover is an expense to far for many by hard-pressed businesses.
BIBA wants the Chancellor to make a bold statement in his Budget and grant relief on IPT for both telematics-based policies and cyber insurance. The resultant uptake in insurance would improve road safety1 and build business resilience so reducing the burden on the state
Flood relief
In 2016 when IPT was increased from 9.5% to 10% Government indicated that the annual revenues raised (calculated at around £250m per year) would be ring-fenced to fund increased investment in flood defence and resilience. Steve White BIBA Chief Executive said: “The country is currently significant climatic threats that are affecting businesses and many peoples’ lives. We demand that the Chancellor, Rishi Sunak, in his first budget formally continues to ring-fence this ongoing contribution from IPT to prevent flood damage to many more homes and businesses.”
Graeme Trudgill, BIBA Executive Director concluded: “Our calls on the Chancellor are not disproportionate. Evidence from our sector shows that the regressive nature of IPT hinders self-protection. For a Government that wants the UK to seize opportunities, taking these small measures and freezing IPT to help businesses and people to access the cover they need and operate free from threat of flood will build confidence in the economy and would be a bold move by the Chancellor.”
BIBA’s detailed budget submission including ideas on reducing the burden on the NHS, maintaining access to the EU market and calls for a global competition objective for the FCA can be found here The organisation has also created template letters which their members and their customers can use to amplify these messages with their own MPs. These can be downloaded from the BIBA website: BIBA Member; Consumers and Businesses
1Research by Lexis Nexis Risk Solutions clearly shows a correlation between the uptake of telematics and reduction in road casualty statistics see https://view.publitas.com/biba/biba-manifesto-2020/page/74
Notes to editors
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Pam Quinn, Head of Communications
020 7397 0223
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020 7397 0224
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- About the British Insurance Brokers’ Association
The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.
BIBA membership includes more than 1800 regulated firms, employing more than 100,000 staff. General insurance brokers contribute 1% of GDP to the UK economy; they arrange 67% of all general insurance with a premium totaling £66.5bn and 81% of all commercial insurance business. Insurance brokers put their customers’ interests first, providing advice, access to suitable insurance protection and risk management.
BIBA receives more than 600,000 enquiries per year to its Find Insurance services, online and via the telephone which are directed to member insurance broking firms.
BIBA is the voice of the sector advising members, the regulators, consumer bodies and other stakeholders on key insurance issues.