Steve Lunn, director of Arthur J Gallagher’s Sheffield office, explains how business can prepare for premium increases.
Following the UK Government’s announcement in the recent Budget, Insurance Premium Tax will rise this November from six per cent to 9.5 per cent.
While the Government’s expectation is that insurers will absorb this additional tax levy, even though the market remains competitive, this unlikely to be the case.
The rise from six per cent to 9.5 per cent is likely to increase the cost of insurance proportionally as the premiums increase.
While there is an introductory concessionary period beginning on November 1, 2015 and ending on February 29, 2016, come March 1, 2016, all premiums will operate with the new 9.5 per cent rate, irrespective of when the policy began.
Extending your policy or attempting to cancel and rewrite prior to November 1 will not help you avoid the tax for another year.
So what can you do now to prepare for any premium increases?
Firstly, give yourself time to explore the impact of the changes and options available.
Don’t leave renewal planning to the last minute.
Make sure you discuss things in-house and talk to your broker in good time so that you know the financial implications.
Next, review your existing premiums and project possible premium increases.
Calculate the additional tax cost for all policy renewals from November 2015 based on existing levels of premium and make a budget provision for any increase.
Where your budgets don’t allow for such increases, explore ways and means of reducing costs and a renewal strategy, with your broker.
Historically, insurers have absorbed small, incremental increases in IPT.
But large jumps make it much harder – and this is a large jump.
That’s why planning ahead is so important.
Arthur J Gallagher can help you build the worst-case financial scenario come renewal time – and that will give you the breathing space to explore potential alternatives.
To find out more, contact Steven Lunn at Arthur . Gallagher, St George’s House, 9 Drakehouse Crescent, Sheffield S20 7HT
Direct Dial: 0114 2901119 Mobile: 07970 082170
Arthur J Gallagher specialises in risk management and insurance solutions.
It has a regional network of client-focused branches in more than 50 locations, including Sheffield.
Each branch is dedicated to providing local service and support to businesses, backed up by national industry specialism.
The above information is general guidance only.