Insurance Premium Tax hikes exposing public sector and charities to higher risk, Zurich Municipal finds
- Rises in IPT from 6% to 12% since 2015 are putting a further strain on public sector finances as three quarters (75.8%) of public sector and charitable organisations feel impacted
- Public and voluntary services forced to cancel or reduce insurance cover since IPT doubled from 6% to 12%
- Public and third sector organisations face higher excesses and deductibles for their claims in order to cover insurance costs
Public sector organisations and charities in the UK are being exposed to more risk in order to afford the cost of protection as a result of Insurance Premium Tax (IPT) rises from 6% to 12% since 2015.
A new study* by Zurich Municipal, one of the largest insurers of the public sector, has revealed the shocking level of impact the rising IPT has had on public and voluntary services as nearly a quarter of respondents (24.9%) no longer cover, or reduced cover, on some risks since 2015.
Moreover, over a quarter (27%) of those surveyed said the IPT rise to 12% has forced them to increase excesses and deductibles in order to control their insurance premiums; retaining more risk and exposing themselves to higher overall costs in the event of claims.
With IPT doubling over the last three years, the survey found that nearly two in five (39%) public and third party organisations had to make tough decisions to cut budgets elsewhere in their organisation and nearly one in ten (9.4%) had to make job cuts in order to cover insurance costs.
To be able to protect their organisations, a further one in seven (16.2%) had to reduce some their services and more than one in ten (13.7%) decreased reserve levels. One in five (21%) have comparably less cover in place as a result of the IPT rises, which leaves them exposed to higher expenses from claims.
Andrew Jepp, Managing Director at Zurich Municipal, commented on the results of this study: “Public sector organisations and charities have been faced with a difficult financial landscape for a number of years and now they are struggling to maintain the level of service and the required level of insurance protection as a result of repeated rises in IPT since 2015. The increasing costs from insurance taxation is forcing the public and voluntary sectors to make very tough decisions to reduce or cancel cover and increase excesses and deductibles. This means they expose themselves to more risk which may leave them vulnerable to greater financial losses if the unfortunate happens.
“For this reason, at a time when public sector finances are increasingly stretched, we urge the government to freeze IPT in the coming Budget.”