The Chancellor’s decision to increase insurance premium tax again has been criticised.
Chancellor Philip Hammond announced in his Autumn Statement today (23 November) that insurance premium tax would increase from 10 per cent to 12 per cent from 1 June 2017.
This is the third consecutive Budget and Autumn Statement in which the rate of the tax has been increased.
It means the rate of insurance premium tax has doubled in the past 18 months.
In the announcement HM Treasury said this was a tax on insurers and any impact on premiums “depends on insurers’ commercial decisions”.
Huw Evans, director general of the Association of British Insurers, said: “Yet another increase in IPT is a hammer blow for the hard pressed.
“It will hit consumers and businesses alike, hurting those who buy business, motor, property, pet and health insurance.
“It marks a doubling of IPT since last year and to claim a consultation on whiplash reforms, which hasn’t even gone before parliament yet, will offset this just won’t cut it.”
According to ABI calculations, the changes will mean an additional cost for personal private medical insurance of £129.37.
Meanwhile corporate private medical insurance would rise by £64.20, its calculations show.
Keith Richards, the Chartered Insurance Institute’s managing director for engagement, said: “It is very disappointing that the government has for the third time in 12 months targeted insurance as a source of additional revenue for the Treasury without considering the unintended consequences this will have on the public’s access to insurance.
“At a time when we are observing under-provision of insurance in many parts of society, effectively doubling insurance premium tax between Nov 2015 and June 2017 will have the effect of disproportionately increasing the cost of protection and further dissuading many people from managing the risks they face.”
British Insurance Broker’s Association chief executive Steve White said it was a “tax on protection” and described it as “regressive”.
Carl Chapman, head of workplace health at Barnett Waddingham, said the motor insurance industry was likely to be most vocal about the increase but employers would be expected to swallow an increase in the cost of private medical insurance and dental insurance.
He said: “The prior is already under intense scrutiny by some employers owing to multiple percentage point increases over the past few years.
“The average rate of insurance premium tax in Europe is between 15 per cent and 20 per cent and I fully expect us to creep up towards these levels over the coming years.
“Employers really need to start looking at mitigating the risk of future increases by exploring alternative funding methods, such as trust based arrangements and fully integrated intervention solutions.”
damian.fantato@ft.com
