Tax relief that affects the cost of insurance should be given to some industries, a body representing brokers is urging.
The British Insurance Brokers Association (Biba) said the relief could, for example, support people living in high-rise buildings and help businesses cover emerging cyber risks.
Biba said he would like to see a commitment to freeze the tax for the remainder of the current parliamentary term, although he acknowledges that the economic challenges do not currently allow for an overall reduction in insurance premium tax (IPT).
IPT is a tax on general insurance premiums and the standard rate has increased several times over the years, with the most recent increase being in 2017.
The tax is levied on insurers and includes costs that insurance firms take into account when pricing customers’ policies.
IPT revenues from these higher premiums provide a “windfall to government” that exacerbates the cost impact on consumers, which could be mitigated, Biba said.
He pointed to figures from HM Revenue & Customs (HMRC) which showed that the standard rate of IPT liabilities for the 2021/22 financial year was £6.746 billion. This was up £426m (7%) on the previous financial year.
According to figures published in January 2023, total provisional IPT receipts for the 2022-23 financial year (April to December) were £5.471bn, up £432m (9%) on the same period last financial year. .
Graham Trudgill, chief executive of Biba, said: “Insurance premium tax revenue for the government has more than doubled over the past seven years to a record £6.627bn.
“Not only this, but according to the government’s preliminary data for April-December (2022-23), government receipts from IPT have increased by 9% compared to the corresponding period of the previous financial year.
“Thus, there is no justification for an increase and no justification at all for granting some tax breaks for certain sectors, including landlords of closed multi-storey buildings.”
Biba encourages people who live in high-rise buildings that are awaiting renovation or are being renovated to provide IPT discounts when insuring.
It also wants to see targeted relief from IPTs on cyber insurance to help build resilience in the wider economy.
In the UK, the vast majority of businesses, particularly SMEs (small and medium-sized enterprises), do not have a separate policy, and only a few have some cyber layer as part of a wider policy, Biba said.
The organization called for the introduction of targeted tax breaks for employees using private health insurance to help ease pressure on the NHS and improve staff protection, along with a number of other requests to the Treasury.
The body wants the Flood Re program, which helps people in flood-prone areas to find affordable insurance, to offer a discount on insurance premiums with recognized flood resilience measures in place.
The spring budget will be presented on March 15.
On Thursday, the boss of insurer Aviva warned of further increases in insurance prices this year after double-digit increases in 2022 amid rising costs for repair bills.
The company increased insurance new business premiums by an average of 20% for motor cover and 13% for home insurance as the cost of claims increased from 9% to 11% last year.
The group’s chief executive, Amanda Blanc, told the PA news agency that the group was forced to raise prices by 5% in the first quarter of 2023, with further price rises expected as inflation picks up.
Ms Blanc said: “But we are optimistic that prices will come down. I hope the price of new cars will come down and the supply chain will open up.”
Insurers have generally been hit by rising motor repair, parts and labor prices, which have pushed up the cost of claims.
The industry has come under pressure amid regulatory scrutiny over renewal rates and car damage assessments, while freezing weather and winter storms have also added to claims bills.
The Association of British Insurers (ABI) has called for a reduction in IPT rates on health insurance.
The ABI suggested that lowering the standard 12% rate of IPT on premiums would encourage more employers and individuals to buy the product and could support more people back into work.
Yvonne Brown, director of health and care policy at the ABI, said earlier this week: “Insurers have a vital role to play in preventing ill health, supporting a healthy workforce and reducing pressure on the NHS.
“The independent sector’s strengths in early intervention and rapid diagnosis and treatment help keep people in work, which is vital to boosting the economy.”
The ABI is also calling for a reduction in IPT rates for insuring multi-storey, high-risk buildings while the property is awaiting repair.