News

IPT on the rise again

In the 2016 budget, Chancellor George Osborne announced a rise in Insurance Premium Tax by 0.5%. This means an increase from the current rate of 9.5% to 10%. The new standard rate of IPT will be due on insurance premiums treated by the legislation as received on or after 1 October 2016.

The Association of British Insurers commented that changes to IPT will affect over 26 million drivers and 20 million households. Government figures predict that the average comprehensive motor insurance policy will increase by £2 per policy, while the average combined building and contents policy will increase by £1. This is in addition to last November’s IPT increase, which added nearly £13 to the average comprehensive motor insurance policy and over £10 to the average combined building and contents policy. However, as all brokers will know, it’s those who pay the highest insurance premiums, typically older and younger drivers as well as households in inner-cities or high flood-risk areas, who will be affected most by the increase.

Yet again this will also result increased costs for brokers and insurers, who will need to update their systems accordingly to deal with the change. There are in the region of 1,000 insurers in the UK who will incur one-off costs in updating their systems to apply the new tax rate.
Insurers, brokers and agents will have to change the details of their contracts but by allowing a delay to 1st October 2016 before the full impact of the rate rise is felt, the government feels the impact will be minimised.

Osborne has suggested that the extra money raised will pay for improved flood defenses across the North of England, but will this be the last increase? With Travel Insurance already charged at the higher rate of 20%, some fear that IPT on other compulsory insurances will continue to rise, leaving the policy holder with increasing costs in what are already difficult times.

If you have any questions with regard to when the new rate should be applied to OnClaims policies, don’t hesitate to get in touch.

August 31, 2016 in: News
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