As the UK’s fears over the spread of the Coronavirus look set to impact next week’s budget brokers have called on the Chancellor not to use Insurance Premium tax as a way of raising revenue.
The British Insurance Brokers’ Association (BIBA) had warned Chancellor Rishi Sunak a hike in IPT will have unintended and dire consequences.
It said: “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.”
The view was backed by Tulsi Naidu, Chief Executive Zurich UK who added: “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 has called for assurances that the rate of IPT will be frozen for the duration of this Parliament.
BIBA said it remains 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 added it would like to see the Chancellor 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 safety and build business resilience so reducing the burden on the state,” it added.
In 2016 when IPT was increased from 9.5% to 10% the 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 (pic) said: “The country is currently facing 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.”