UK brokers call for zero tax on cyber premiums

The British Insurance Brokers’ Association (BIBA) has called for cyber insurance to be exempt from Insurance Premium Tax (IPT) ahead of the Spring Budget to help boost demand among businesses. The association is also calling for an overall reduction in IPT, partly to help with the rising cost of living for both individuals and businesses across the UK and for renewed national investment in flood defences to help tackle this rising threat. BIBA pointed out that take-up of standalone cyber insurance remains a “real issue”, with very low penetration across the UK. In the 2023 Cyber Security Breaches Survey carried out by the Department for Science, Innovation and Technology, only 6% of micro-businesses and 11% of small businesses have cyber cover. Some 29% of micro businesses and 33% of small businesses said they only have cyber cover as part of a wider policy rather than on a standalone basis. BIBA’s own research, carried out in collaboration with Opinium, found that 42% of SMEs surveyed admitted they have had to reduce the amount they spend on insurance due to financial reasons. The association pointed out that two of its biggest members – Aon and Marsh – have identified cyber as a “major risk” to the global economy and to the UK. Apart from cyber, BIBA called for a cut to the headline rate of IPT from 12% to 10%, for multi-occupancy residential buildings which require cladding remediation to be exempt from IPT, and for IPT on travel insurance to be aligned with the standard rate, ending the anomaly whereby 20% is applied. Graeme Trudgill, chief executive of BIBA, commented: “We know individuals and businesses are struggling due to the cost of living, and this sits at the heart of our calls to action in our latest manifesto and our budget submission. Recently there have been multiple stories about businesses and consumers cutting back on their insurance cover levels, or in extreme cases cancelling cover entirely, and we believe these measures will make a difference.” To help flood-affected properties, BIBA has asked for government to commit to long-term investment in flood defences at a higher level than 2020. It noted reports from the National Audit Office and the Public Accounts Committee that show the value of the government’s flood defence spending for 2021-2027 is falling by 40%, thus reducing the number of additional properties protected by enhanced defences. The association also suggested an exemption for flood resilience materials from Value Added Tax, to reduce their cost and increase deployment, and to restate the commitment made in 2016 to ring-fence a proportion of IPT receipts to specifically fund flood defence investments. This would support BIBA’s recent call for broader reforms to planning consent for buildings planned in areas of flood risk, and a need for local authorities to enforce existing regulations on new builds. Trudgill added: “2024 marks the start of the election year, and at a time when political parties are trying to appeal to the country for support, they need to consider the realities people are experiencing, particularly when their key economic targets include growth and economic security. “We believe the measures we have set out would help increase the attractiveness of insurance, deliver cost savings for individuals and businesses, and improve wider resilience against flooding. “Ultimately, insurance brokers always have customer protection at the heart of what they do, and we believe the upcoming Spring Budget is a great opportunity for the government to act on this at a national level.”

UK brokers call for zero tax on cyber premiums

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