Protection premiums could rise by up to 10 per cent if HM Revenue &Customs takes protection out of the basic life insurance tax regime, according to Grant Thornton.
At the Protection Review conference in London last week, Grant Thornton senior actuarial consultant Nigel Cooke predicted the tax implications of such a move, which HMRC has been consulting on, would mean that insurers would be forced to raise their premiums.
Cooke said: “If HMRC quite logically decides that pure protection should not be within the basic life insurance tax regime, it probably means that for a large number of insurance writers those premiums will rise by 5 to 10 per cent, before anybody adds insurance premium tax to that.”
“The Government would be making it more difficult and unattractive for people to protect themselves, which I do not think is what they want.”
Le Beau Visage managing director Peter Le Beau says: “There is a concern about such a change to the tax regime. It is another unintended consequence that is coming out of left field that will worsen opportunities to sell protection.”
Association of British Insurers assistant director of health and protection Nick Kirwan says: “If you strip out the benefits of the tax regime, then I would agree it is likely to lead to prices increasing. Prices are set by the most competitive price in the market.”