LONDON: Raising the tax on insurance premiums paid in the United Kingdom could result in rate increases by insurers and coverage reductions by buyers.
But at least one source said some insurers may absorb the added cost to keep the business in the U.K.
The U.K. insurance premium tax will increase to 9.5% from the current 6% for coverage bought on or after Nov. 1.
U.K. Chancellor of the Exchequer George Osborne had announced the tax increase in July as part of his summer budget.
At the same time, Mr. Osborne also said the nation’s corporate tax rate would be cut to 18% from the current 20%, effective by 2020, in a move aimed at keeping the United Kingdom competitive.
The British Insurance Brokers Association said it hopes the government will reverse the premium tax increase.
We are extremely disappointed in this rise in insurance tax (that) will mean insurance will become more expensive for the public,” BIBA CEO Steve White said in a statement.
Though the insurer pays the tax to the government, it will show up as higher premiums for the property/casualty buyer.
