Premium tax in the UK is set to rise, and this is said to be resulting in an increase in rates by insurance providers. The increase is from the current 6% to 9.5%, a staggering 58% increase. This increase was not necessarily unexpected, as we have seen a trend in increasing tax rates similar to this globally, although the magnitude of the increase was a little disappointing for most.
That said, insurance tax rates in other countries, most notably those across Europe and the US are much higher than 9.5%, with insurance premium tax in the US topping 40%.
These increases are coming at a time when the insurance market is much stricter than it used to be, with more critical solvency requirements and increased regulation of insurance services across the board. It is a worry that these increases could open up the potential to cost cutting, with some insurers looking to exit to avoid the consequences of these steep tax increases.
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