Insurers on UK '17 Budget: investment plan well received but taxes remain an issue
Insurers have welcomed the investments included in Chancellor Philip Hammond’s Spring Budget announced today, March 8, 2017, but the Insurance Premium Tax remains an issue for the industry.
“The announcement that the Government is to invest £270 million in disruptive technologies such as driverless cars is most welcome,” said David Williams, technical director at AXA UK.
“The UK has a well-established and growing role as a leader in the development of disruptive technologies both in Europe and across the world and today’s commitment will go some way to cementing that position,” Williams noted.
Widespread adoption of autonomous vehicles will completely transform the motor insurance sector in the long term as liability shifts towards manufacturers and the traditional risk pool shrinks, according to Fitch Ratings.
The shift will offer opportunities for motor insurers to adapt their business models. The gathering and analysing of driving data from autonomous vehicles will play a key part in the development of insurance products. Recorded data could provide underwriters and actuaries with greater ability to understand and price risks, while data sharing between the manufacturer and the insurer will be vital for determining who is liable for the cost of compensation, according to Fitch.
“Driverless technology will revolutionise the way we drive, how businesses transport goods and, crucially, improve the safety of our roads. AXA has been playing a central role in the three Government-backed projects to make driverless cars a reality on our roads and we will continue to support the Government to ensure any investment is channelled in the right way to get the most benefit.”
In the Spring budget, Hammond has not suggested any further increases of the Insurance Premium Tax (IPT), which was well received by the British Insurance Brokers’ Association (BIBA).
“We see the absence of an IPT rate hike in the 2017 Budget as good progress and will continue to campaign to keep the tax at its current level, ideally without the planned increase in June, or lower,” BIBA said in a statement.
The standard rate of IPT will increase from 10 percent to 12 percent from June 2017. This increase will mean the rate will have doubled from 6 percent to 12 percent in under two years.
It is estimated that the latest increase will raise an additional £680 million in 2017/18, rising to £840 million the year after, according to KPMG.
Some within the industry were hoping that Hammond would backtrack and scrap the planned June IPT increase.
“We are very disappointed with the Chancellor’s decision to not use the Budget as an opportunity to address the unfair levels of insurance premium tax (IPT),” said Keith Richards, managing director of engagement at The Chartered Insurance Institute.
“Around 17 organisations and charities, including many financial services bodies, called for a climb down from last year’s Autumn Statement announcement to increase the IPT to 12 percent in light of stresses on consumers’ premiums.
“After effectively doubling IPT over the past two years, the government has not tackled this pressing issue. We are concerned the unintended consequences of artificially increasing the cost of insurance could dissuade people from insuring against the risks they face, potentially leaving thousands unprotected.
“At a time when the public needs more access to insurance and protection, dis-incentivising insurance cannot be worse timed.”
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