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How you can mitigate insurance tax rise

Insurance-tax_detail

In its third increase in just two years, insurance premium tax (IPT) rose from 10 to 12 per cent in June; a growing burden since the tax was introduced in 1994 at just 2.5 per cent. 

The impact on the public as car insurance premiums rise has attracted much of the attention. But it puts further pressure on UK businesses, particularly those already paying large premiums, at a time of growing uncertainty following the UK’s decision to leave the EU.

Yet there are things a business can try to reduce their premium and match or beat the increase, without reducing the cover provided by their policy:

Ask about alternatives

The first option for those businesses who have used the same insurer for years is to challenge them to ensure they are offering the very best deal. Some insurers and brokers may just hope their clients are too busy to assess what’s on offer and accept the first renewal offer.



However, repeatedly asking for alternative quotes each year can be time-consuming and counterproductive, as some insurers will not quote if they feel their prices are being used as leverage to reduce the holding insurer’s premium. 

The best insurance brokers will market their client’s business every few years to confirm the lowest possible premium is being achieved, while delivering the cover needed.

Agree rebates

Businesses paying significant premiums, typically more than £10,000 per annum, with claims below an agreed level may be able to agree rebates with some insurers when agreeing to renew. Rebates will usually range from 5 to 15 per cent of the annual premium and a good broker will be able to guide a business through the options available.

Increase excesses

For businesses with a history of making small or no claims, accepting a larger policy excess could help attract a premium discount that covers the IPT increase.

Reduce risks 

With experience over time, businesses typically improve their processes, improve security, consolidate services or reduce their overall risk. But many forget to explain the changes to their insurers, who might reduce the premium based on the likely reduction in risk. If in doubt, ask.



Delete extras

The same changes that can reduce risk may also make some additional cover obsolete, but still being paid for. Premiums might include cover for large amounts of cash on the premises, when the majority of transactions involve card payments. It makes sense to consult a broker and consider every aspect of cover to ensure the right cover is achieved, while only paying for what is strictly necessary.

Relationships matter

Although it’s still best practice to review your cover annually, there are insurers that may guarantee premiums or offer discounts for policies that run beyond the usual one year, to perhaps two or three years (further IPT increases would still be applied).

This introduces some certainty when budgeting and can make additional benefits available, like interest-free instalments, or even a contribution to make improvements in the business that will reduce risk to the insurer – a genuine win-win. 



Although businesses cannot avoid the IPT increase, by taking action and considering all their options it is likely many could reduce their premiums by as much as the increase, and in some cases more. Those businesses most likely to feel the full impact of the June increase are those that do nothing, which is unforgivable given the options available to them.

Phil Cowell is a Chartered Insurance Broker and Director of IFM Select
www.ifmselect.com