During the Autumn Statement in November 2016, the Chancellor revealed yet another rise in the Insurance Premium Tax (IPT), from 10% to 12%.
This means business written on or after June 2017 will be taxable at the new rate of 12%.
Ultimately, policyholders will be looking for clarification and understanding. Having borne the brunt of the relentless IPT hikes of the past few years, they are justly concerned at forking out yet again. For many small business owners, this rate rise is cutting off a potentially significant slice of their income.
Over recent years we have seen the industry wide impact this kind of increase has across the market. Brokers must apply the new charges to their operating systems, amend their contract information and prepare themselves to advise disgruntled clients. Meanwhile, underwriters may find themselves under pressure to change their normal working practices in order to absorb the increased costs resulting from higher IPT.
For insurers, this rise has been accompanied by a sense of deja-vu. After all, this is a tax that has risen repeatedly for almost two years running. Since 2014, the tax has doubled. Having been steady at 5% as recently as 2010, the IPT has often been the most viable option for raising state funds for our government in such uncertain times.
Since the tax is applied to individual policies, those who pay higher insurance premiums, e.g. high hazard businesses, will end up paying a higher amount of IPT. Considering the IPT has been added to 50 million general insurance policies, it’s had a profound effect and led to some calling it regressive.
At Corin, we are working with our brokers to manage the impact of the IPT changes whilst continuing to deliver expert technical advice and quality products.