Not so long back, UK Governments were so keen for people to make cautious long-term investment, cover their lives and other risks through insurance policies, that life assurance premiums qualified for income tax relief. That ended for new policies in 1984, perhaps a turning point to mark the start of a trend towards insurance being regarded less benevolently by Government.
A decade later, the pendulum was swinging the other way, because in 1994 insurance premium tax (IPT) was brought in, making many forms of general insurance more expensive. It did not apply to life assurance, but home, motor, medical and many other policies have since been affected. More recently, in January 2011, the IPT rate went up from 5% to 6% – travel and some other insurance attracts a higher rate, now 20%. The tax relief on continuing pre-1984 life assurance policies is under threat.
So, is there any good news on the horizon for buyers of insurance, particularly the protection variety? Well, yes, in a way. If you get a move on, you may avoid the next wave of UK and European legislative changes bound to push up costs for policyholders. In mere months, 2012 premiums could start to look like the bargain of the millennium and the old saying ‘he who hesitates is lost’ might aptly be changed to ‘anyone who hesitates could lose money’.
Female cost advantage will go…
First up is a life insurance premium hike for women from 21 December, when a European Court of Justice ruling on gender equality hits new policies. No longer will gender be a permissible criterion for setting premiums. Women have long enjoyed cheaper life cover than men because of their greater life expectancy. They will pay extra but men may notice no reduction if insurers pass on the costs of equalisation.
…but men will also pay more
Gender equality will also apply to insurance such as critical illness and income protection, where women have statistically made more claims than men and pushed female premiums higher. Equality will mean that men must pay higher premiums on such cover. Just to make things worse, a change in the taxation of protection insurance providers is also set to pile more upward pressure on premiums, for men and women alike.
Slightly further in the distance – 2014 – is Solvency II, an EU-inspired move to make protection insurance providers hold more cash in reserve for any future financial problems; well intentioned, perhaps, but costly. So, that’s yet another reason not to hesitate if a foreseeable need for protection insurance exists.
Remember, we offer independent advice on all manner of small business and personal insurance.