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Will George Osborne’s 10% Insurance Premium Tax rate damage the industry?

Will George Osborne’s 10% Insurance Premium Tax rate damage the industry?

Will George Osborne’s 10% Insurance Premium Tax rate damage the industry?
Chancellor George Osborne announced an IPT increase of 0.5% to kick in on October 1 in last month’s budget, taking the rate to 10% – and now that the news has had time to sink in, we think brokers’ views should be made known.

The Insurance Premium Tax rate rise was greeted by derision within the industry at the time – BIBA claimed it was ‘astonished’ at the forthcoming hike in the ‘unfair’ tax, with CEO Steve White criticising the ‘increased burden’ on policyholders.

The ABI also expressed its displeasure, with spokesman Malcolm Tarling this week reiterating the trade body’s opposition. He said 0.5% was “better than 3%”, which was being rumoured in the weeks leading up to the budget.

Tarling argues that any gains resulting from the Government’s clampdown on dubious whiplash claims, designed to lower premiums for all drivers, are being negated by IPT.

“We would argue for cuts to IPT, not for it to go up,” he said. “It pushes up the cost to the customer and it’s contrary to the government’s argument that they are reducing the cost of insurance for motorists.”

 “They’re giving with one hand and taking away with the other,” he said. “It’s disappointing as ultimately it filters through into higher premiums.”

Tarling also claimed the increase would penalise all policyholders to pay for schemes which the Government should already be funding.

He told Insurance Business UK: “The Chancellor said £700m per year raised by IPT would be diverted back to fund flood defences. Any money that goes into flood defences is welcome, but it should be normal Government expenditure. We don’t want IPT to be seen as a cash cow.”

Amanda Wright from Lindonwood Insurance Brokers in Burnley was broadly supportive of the ABI’s stance, but said the introduction of IPT seems to have gone largely unnoticed by customers.

“There hasn’t been any sort of comment at all that it’s going to go up. We haven’t really had any problems at 9.5% to be honest,” she said. “I agree with what the ABI is saying though – why should [IPT revenues] just be concentrated on flood defences?”

Now it’s time for you to have your say – complete our brief survey to make your voice heard.