Insurers' shopping list for the next Chancellor
IT'S not often you'll hear business welcome the prospect of tax rises, but the Chancellor's comments in Washington last week that his current commitment to not raising VAT, national insurance or income tax was hampering the Government's ability to reduce the deficit was surely a statement of the obvious.
Given that we're now into another frenzied period of electioneering, such comments probably represent well-prepared ‘kite flying' as part of the fine-tuning process for the Conservative party's manifesto.
When it comes to tax, the Government always gets its way. If they can't use major levers such as income tax, revenue will come (less efficiently) from elsewhere. And as I've mentioned previously, one of those other sources is insurance premium tax (IPT).
You won't have heard much about IPT, but as the British Insurance Brokers Association (BIBA) revealed in its 2017 manifesto launch that between 2015 and June this year, 50 million policy holders will see their IPT burden double through three successive increases to a record high of 12 per cent.
As somebody once quipped: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest amount of hissing”. The insurance goose is now hissing.
Insurance brokers employ over 100,000 people in the UK managing £21 billion of general insurance business. They arrange 78 per cent of commercial business. Some may argue of election fatigue, but for the industry the upcoming Westminster election is an opportunity to campaign for changes that will improve our capacity to look after customers.
Putting a halt to any further increases in IPT is high up on the industry's ‘shopping list', but it is by no means the only issue. Regulation in the sector has reached stifling levels. Since 2013 when the FCA was created it has produced more than 60 papers, reviews, statements and studies.
Research by London Economics has found that the subsequent cost of regulation for small general brokers has increased on average by 70 per cent from 4 per cent to 6.8 per cent of income. The research also suggested that one in seven employees in these brokers were now dedicated to working on regulation-related issues. This is unsustainable - distracting from customer-facing work and pushing up costs.
I'd also argue strongly that Government and the industry should continue to work closely on issues such as cyber-crime, flood prevention and encouraging innovation in emerging sectors.
One of those emerging sectors is autonomous vehicles and BIBA has made it a priority in its manifesto. Driverless vehicles are in the process of moving from the realm of science fiction to science fact and in the coming decades the transport revolution may be of a similar scale to that of the knowledge revolution.
Autonomous vehicles have the potential to dramatically improve safety and mobility, but they will also require innovative insurance solutions. Legislative and regulatory changes will be needed to help the industry provide proper cover in circumstances when accidents occur but there's no physical driver behind the wheel.
At a time when businesses are being asked to be increasingly competitive in preparation for Brexit, it's beholden on Government to provide an economic framework which supports that vision. An election is the private sector's chance to set out how this can be achieved. If you don't ask, you won't get!
:: Michael Blaney is managing director of the Autoline Insurance Group (www.autoline.co.uk)