How many of you have had to have difficult conversations with your clients when it comes to insurance premiums recently? I would imagine those who have been fortunate enough not to have made a claim and who fit in to an insurer’s ‘standard’ box are puzzled by significant hikes in their renewals.
As last year the lack of significant flooding and storm damage, it’s clear that the rate of Insurance Premium Tax (IPT) has had a major impact. It rose again at the beginning of June from 10% to 12% – the third increase in the past 18 months. Only as far back as 2010 the rate was just 5%. This latest hike was introduced in last year’s Autumn Statement with the Chancellor citing the fact that IPT rates in the UK remained some of the lowest in Europe and that money was needed to pay for the government’s infrastructure plans.
The Association of British Insurers reacted furiously, describing the increase as a “hammer blow for the hard-pressed” while insurers themselves have said the hike represented an unwarranted attack on millions of people simply looking to do the right thing and protect themselves against the unexpected. The affordability of insurance is being threatened and UK citizens widely regarded as being woefully underinsured, this ever rising insurance taxation could result in this situation worsening.
However, whatever party you personally sided with, the results of the General Election could have given a silver edge to the IPT cloud.
The message from the UK public appears to be that it is fed up with austerity and fearful of what a so-called ‘hard’ Brexit could mean for the country. As a result, the government had to think long and hard about how best to prune its manifesto to ensure a successful Queen’s Speech given it is a minority government and a deal with the DUP hangs in the balance.
Unsurprisingly it was dominated by the legislative demands of Brexit with eight of the proposed 24 bills relating to Brexit and its implications for key industries. However huge chunks of the Tory manifesto were missing and while there were commitments to infrastructure such as the next stage of the HS2 network, I didn’t pick up on anything that would ‘demand’ the Chancellor to further raid the purses of insurance policyholders to fill gaps in funding.
The proof – as ever – will be in the eating of the pudding and this is all speculation on my part of course. However I did sense a change in tone and it could be that the inexorable rise in IPT will be stalled … at least for the time being!
Kevin Paterson is managing director of Source Insurance