Relief should be given on tax that affects insurance costs say industry bodies

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A body representing brokers is urging that tax relief affecting the cost of insurance should be given to certain sectors.

The British Insurance Brokers’ Association (BIBA) has suggested that this relief could, for example, support people living in vulnerable high-rise buildings and help cover businesses for emerging cyber risks.

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BIBA said that, while it recognizes that economic challenges do not currently allow a general cut to the insurance premium tax (IPT), it would like to see a commitment to the tax for the remainder of the current parliamentary term.

IPT is a tax on general insurance premiums and the standard rate has been increased several times over the years, with the last increase occurring in 2017.

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The tax is levied on insurers and feeds into costs that insurance companies consider when pricing customers’ policies.

There is no justification for the increase and there is every reason to offer some tax relief for certain sectors, including leaseholders in multi-occupancy buildings.

Biba argued that the IPT receipts from these higher premiums provide a “benefit to the government” that exacerbates the cost impact for consumers, which could be reduced.

It pointed to figures from HM Revenue and Customs (HMRC) which showed standard rate IPT liabilities for the financial year 2021/22 stood at £6.746 billion. This was £426 million (7%) higher than in the previous financial year.

According to figures published in January 2023, total provisional IPT receipts for the 2022-23 financial year to date (April to December) were £5.471 billion, up £432 million (9%) on the same period in the previous financial year Was. ,

Biba Executive Director Graeme Trudgill said: “Insurance premium tax receipts to the government have more than doubled over the past seven years to a record £6.627 billion.

“What’s more, government receipts from IPT are 9% higher, as per the government’s provisional data for April to December (2022-23), as compared to the corresponding period of the previous financial year.

“So there is no justification for an increase and every reason to offer some tax relief for certain sectors, including leaseholders in multi-occupancy buildings.”

Biba is seeking IPT relief when it comes to insuring people living in high-rise buildings who are waiting for or undergoing treatment.

It also wants to see targeted relief from IPT on cyber insurance to help build resilience in the wider economy.

Biba said that in the UK, most businesses, especially SMEs (small and medium enterprises), have no standalone policy, and only a few have some cyber cover as part of a wider policy.

The organization called for a submission to the Treasury, along with a number of other requests including calling for targeted tax relief for staff using private medical insurance to help ease pressure on the NHS and improve employee protection Is.

The body wants Flood Ray – a scheme that helps people in flood-prone areas find affordable cover – to be allowed to waive insurance premiums where recognized flood protection measures have been installed.

The spring budget will be presented on March 15.

On Thursday, the boss of insurer Aviva warned of a further rise in the price of cover this year after a double-digit increase in 2022 amid rising costs of repair bills.

The company increased insurance new business premiums by an average of 20% for motor cover and 13% for home insurance as it saw claims cost rise between 9% and 11% last year.

Amanda Blank, the group’s chief executive, told the PA news agency that the group has already had to increase prices by 5% in the first quarter of 2023, with further price increases as inflation remains intense.

Ms Blank said: “But we are optimistic that prices will come down. New car prices are coming down and hopefully the supply chain will open up.

Insurers have generally been hit by rising prices for motor repairs, parts and labor, which has increased the cost of claims.

The industry has also been under pressure amid regulatory scrutiny over renewal rates and car damage assessment, while cold weather and winter storms have also pushed up claims bills.

Insurers have a vital role to play in preventing ill health, supporting a healthy workforce and reducing pressure on the NHS

The Association of British Insurers (ABI) has also called for a cut in the IPT rate on health insurance.

The ABI suggested that reducing the standard 12% IPT rate imposed on premiums would encourage more employers and individuals to purchase the product and could help bring more people back into the workplace.

Yvonne Braun, director of health and safety policy at the ABI, said earlier this week: “Insurers have a vital role to play in preventing ill health, supporting a healthy workforce and reducing pressure on the NHS.

“The independent sector’s strengths in early intervention and early diagnosis and treatment can also help keep people in the workplace, which is vital to boosting the economy.”

The ABI is also seeking a cut in the rate of IPT on building insurance for high-rise, high-risk buildings while the property awaits treatment.

A government spokesman said: “Developers have received legally binding contracts that will commit them to pay an estimated £2 billion or more to repair buildings developed or refurbished over the past 30 years.

“This means that with the building safety levy, industry is paying an estimated £5 billion directly to make their buildings safer.”

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