It’s a crazy world when people and businesses that take responsibility for themselves by purchasing insurance – in order to cover unforeseen risks – are being penalised.
But that’s what is happening right now.
Timeline for insurance
And it’s most obvious in the increases that have been made to insurance premium tax in recent times.
The British Insurance Brokers’ Association (BIBA) explains that insurance premium tax has been collected on insurance policies sold in the UK since 1994 when the rate was 2.5 percent.
This was raised gradually to a previous high of six percent in 2010.
In 2015 the chancellor revisited insurance premium tax and, between then and now, the amount payable to government coffers has doubled to a rate of 12 percent on most types of insurance from June 2017.
In the last Autumn Statement, the BIBA said the chancellor hinted that the tax paid on insurance could increase, almost doubling again.
Scale back insurance
The concern is that many individuals, households and businesses are likely to dramatically scale back their insurance protection if the tax on insurance increases in forthcoming Budgets.
There is only so much to round. And faced with higher prices, some consumers might forego their private medical insurance or car insurance, if that’s what it takes to pay the bills.
BIBA chief executive Steve White is absolutely right when he said insurance premium tax is regressive and penalises those who pay more for their insurance. This includes groups such as young drivers and communities in flood risk areas.
White points out that the tax contribution for a £1,500 young driver’s policy has increased from £90 to £180 in the last 18 months alone.
With young drivers more likely to drive without insurance, any further increases are likely to have an impact on the number of uninsured drivers on the UK’s roads.
3 Things That Will Change the World Today
After the government’s recent announcement that it will reduce the Ogden discount rate by more than the industry expected, any further increase in IPT would be a hammer blow for insurers who are already under a severe regulatory burden and their customers.
Fitch Ratings has warned that the Ogden rate cut means UK motor insurers will face a short-term hit to earnings from the increase in lump-sum reserves, and higher reinsurance costs.
BIBA has cited figures that the government changes to personal injury awards could increase some premiums by £1,000 and an average comprehensive motor policies even rising by up to £75.
The economic value of insurance has long been recognised and it also supports wider societal ends.
Therefore, let’s stop this madness of higher insurance taxes because this punishes the very people who wish to be less of a burden on the state by taking responsibility for themselves.
The acid test of government should be about helping those people who help themselves. Not damning those who have bought cover to protect themselves and their assets.