Biba calls for freeze on Insurance Premium Tax

Biba believes that increasing taxes on general insurance will prove counterproductive.

It said: "Iincreases to tax on premiums will serve only to add further financial pressure during the recession and discourage individuals and small businesses from taking out adequate and appropriate insurance protection. This could result in greater losses to HM Treasury than any increase in rate that may be proposed."

Eric Galbraith, Biba chief executive, said: “Biba would like the Government to recognise in its Budget that a healthy insurance sector helps drive a healthy economy, avoiding further increases to IPT is a key way to ensure stability and assist the UK’s economic recovery.

“Our research last year demonstrated that businesses and consumers were reducing insurance cover as a result of the recession and we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance or even a lack of insurance protection.”

Biba said: "The forthcoming Budget is an opportunity for the new coalition Government to demonstrate its determination to promote the value of good risk management and insurance protection. Biba hopes that it will not view an increase in IPT as an easy option to raise tax."

Mr Galbraith concluded that whilst the general rate of IPT is 5%, the travel insurance sector is subject to an extremely high level of 17.5% and reducing this tax would help consumers.