BIBA believes that increasing taxes on general insurance will prove counterproductive. Increases to tax on premiums will serve only to add further financial pressure during the recession and discourage individuals and small businesses from taking out adequate and appropriate insurance protection.
This could result in greater losses to HM Treasury than any increase in rate that may be proposed.
General insurance protection is a vital component of an effective modern economy. It helps individuals and businesses mitigate the effects of potentially severe losses. Insurance protection allows the economy to operate and grow.
Taxing the insurance industry further via IPT undermines the recovery because it harms the industry’s ability to support good risk management.
Eric Galbraith, BIBA Chief Executive, said:
“BIBA would like the Government to recognise in its Budget that a healthy insurance sector helps drive a healthy economy, avoiding further increases to IPT is a key way to ensure stability and assist the UK’s economic recovery.
“Our research last year demonstrated that businesses and consumers were reducing insurance cover as a result of the recession and we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance or even a lack of insurance protection.”
The forthcoming Budget is an opportunity for the new coalition Government to demonstrate its determination to promote the value of good risk management and insurance protection. BIBA hopes that it will not view an increase in IPT as an easy option to raise tax.
Galbraith concluded that whilst the general rate of IPT is 5%, the travel insurance sector is subject to an extremely high level of 17.5% and reducing this tax would help consumers.
