The Association of British Insurers (ABI) is urging the Chancellor to freeze the rate of Insurance Premium Tax (IPT) in the Autumn Statement on 17th November. As hard-pressed families, businesses and charities battle the rising cost of living, a hike in IPT could lead to people cutting back on insurance cover and leave them at the mercy of unexpected financial setbacks should they experience misfortune such as flooding, fire or theft.
Research from Public First, commissioned by the ABI, found that 8 in 10 people (79% of respondents) think that an increase in IPT would be unfair. The research also found:
- 7 in 10 people (71%) agree that when other bills go up, most people would likely stop paying for insurance
- Nearly one in five (18%) know someone who has cancelled their insurance because of concerns about wider costs.
- Whilst not being able to pay for energy bills is the greatest concern for respondents, 11% think they are at risk of not being able to afford their insurance over the next year. This is despite continued efforts by home and motor insurers to keep premiums competitively priced – contents insurance, for example, is at a ten year low.
IPT applies to most general insurance policies including motor, home, pet, and private medical insurance. The standard rate of 12% has doubled since October 2015 with £220 raised per household in 2021/22. It hits the poorest the hardest who spend proportionately more on insurance, such as home and motor.
Since its introduction, IPT has increased more rapidly than the tax rate applied to alcohol and gambling and has had comparable rises to tobacco duty. In the last financial year (2021/22), IPT revenues were £6.792bn – more than the duty on beer and betting combined.
Hannah Gurga, ABI Director General, said:
With many families and businesses facing tough financial decisions, the last thing they need is a rise in Insurance Premium Tax. Any increase in the rate of IPT at this time would likely impact those who continue to be most vulnerable to the cost of living crisis and we urge the Government to keep the rate frozen.
Hannah Gurga
ABI Director General
Scott Corfe, a Director in the Data & Modelling team at Public First, said:
Our research shows that households are concerned about insurance costs – particularly amid the current cost of living crisis. We estimate that 900,000 households would likely cut back on home contents insurance if premiums rise by 10% or more – leaving them unprotected against unexpected costs such as a fire or burglary.
“There is therefore a risk that a higher rate of Insurance Premium Tax would undermine the financial resilience of households – especially lower income ones – at a time when such resilience is already under pressure
Scott Corfe
Director in the Data & Modelling team at Public First
For more information contact the Press Office.