In this second instalment from our upcoming Business Today feature on the rise in insurance premium tax Peel Hunt analyst Anthony Da-Costa considers the impact on our listed insurance firms.
“It is a sensitive area for listed firms because it would reflect forward looking pricing. Obviously the general insurers will pay the higher IPT over to the government. How it is absorbed is the key question,” he said.
“Basically some companies will charge customers the same premiums to maintain market share and will hence make a lower margin- other companies will charge higher premiums reflecting the higher rate. Companies won’t disclose whether this will effect consumer premiums because it sends out that direction of pricing. In an ‘ideal world’ IPT would be passed onto consumers in the same way a VAT increase would effect consumers. Given the high level of competition and the consumer hunt for price via price aggregators- price is sensitive and insurers may reduce margin to maintain market share.”
In the next part of our feature on the Insurance Premium Tax Ian Crowder, head of PR at the AA describes the impact on the company itself...