Trade association’s Graeme Trudgill says increase “makes mockery” of insurance growth plan.
The British Insurance Brokers’ Association (Biba) said it was “extremely disappointed” in the decision to increase Insurance Premium Tax (IPT) to 9.5%.
Following the announcement by Chancellor George Osborne in the summer Budget for 2015 Biba’s executive director Graeme Trudgill tweeted: “IPT up to 9.5% from November makes a mockery of the insurance growth action plan and efforts to reduce cost of motor insurance.”
The association described the rise as a “stealth tax”.
Biba CEO, Steve White, said: “We are extremely disappointed in this rise in Insurance Premium Tax and will mean insurance will become more expensive for the public as a result. Those hit by this stealth tax will include the 20.1 million households with contents insurance; 19.6 million with motor insurance and 17 million with buildings insurance.”
He added: “The Government has been working with the industry to reduce the cost of insurance for consumers – including a summit chaired by the Prime Minister. It therefore seems counterintuitive to be taking measures which will add to the cost – effectively taxing protection.”
White continued: “We hope the Government will review this rise and correct it in further budgets.”
The Chancellor also pledged to regulate claims management companies more strictly, a move welcomed by Trudgill who said via Twitter: “Pleased chancellor has listened to our points on regulation of claims management companies.”
Ben Fletcher, director of the Insurance Fraud Bureau (IFB), also welcomed the news.
He said: “There are many genuine claims management companies (CMCs) which provide a service for honest consumers and this must be preserved, however there is equally a need to recognise that corrupt CMCs are a significant factor in organised insurance fraud and work needs to be done to improve regulation.
“From the IFB’s perspective, the evidence is compelling as currently just under half of our live investigations feature a CMC somewhere in the scam and over the last 18 months we have received more than 400 intelligence reports where such a company has been at the heart of the problem. A major review of the regulation of this industry to improve transparency and to implement robust processes which will enable the detection of corrupt practices is absolutely welcomed.”
According to PriceWaterhouseCoopers the announcement offers a mixed bag for the insurance sector. Colin Graham, PwC global insurance tax leader commented:
“The Summer Budget will largely be viewed as mixed news by groups in the insurance sector. The Chancellor has shown his commitment to ensuring Britain remains competitive by announcing a cut corporation tax to 18% by 2020. However insurance, particularly the London market, is a global business and it is important that the Chancellor ensures the UK remains the most competitive place in the G20 to do business.”
He added: “However this positive feeling will be tempered by the rise in the standard rate of insurance premium tax to 9.5% from 1 November, changes to pension relief and greater regulation of claims management companies. It will be important that these new rules don’t create uncertainty and unnecessary cost for business. We are yet to see the detailed measures proposed.”