The Association of Insurance and Risk Managers in Industry and Commerce (AIRMIC) has expressed its disappointment with the increase in Insurance Premium Tax (IPT) announced by chancellor George Osborne in the 2015 Summer Budget.
Osborne announced a rise in IPT from 6 percent to 9.5 percent, effective from November.
Julia Graham, technical director of AIRMIC, said: “While this wasn't totally unexpected given an upward trend in similar taxes globally, we are disappointed by the magnitude of the rise: an increase of over 50 percent, raising in excess of a billion pounds in additional tax revenues.”
“Insurance is critical for businesses, and yesterday’s announcement is an added challenge for UK business and the insurance industry in an already tough environment.”
Graham said the timing was particularly difficult given that many companies will have already set their budgets for the next renewal season.
She added that, with businesses already under pressure to reduce costs, AIRMIC would urge them to resist the temptation to reduce their insurance cover and limits in the face of potential price hikes.
“Having an effective insurance programme is an important underpinning of any business strategy and cutting corners is a false economy,” she said.
The tax rise comes just weeks after AIRMIC issued a report urging businesses to put claims efficacy before price when buying insurance.
The report, written with PricewaterhouseCoopers, argued that certain insurance cover is critical to the financial well-being of a business, and that the challenge for insurance buyers is to raise awareness of the value of insurance beyond that of a commodity.
Graham said the tax increase poses a further challenge: “While AIRMIC is urging businesses to focus on the strategic importance of insurance, the IPT hike is putting the focus back on price.”
