The firm has called for a reduction in tax for telematics providers or a complete exemption from it due to the safety and cost benefits they provide
Insurtech firm insurethebox has branded insurance premium tax (IPT) rates “illogical and ill-considered” – calling for them to be reduced or scrapped completely for telematics policies.
The telematics provider’s comments were made in response to a consultation launched by HMRC earlier this month into IPT rates, with the UK tax regulator asking for evidence the current rates lead to unfair tax outcomes.
It’s claimed by insurethebox that IPT still unfairly boosts the cost of motor insurance for younger drivers, despite a 2017 statement from the British Insurance Brokers’ Association (BIBA) highlighting the issue.
What is insurance premium tax?
IPT is an amount insurance firms must pay to the government on general insurance policies to compensate for their exclusion from VAT contributions.
Insurtech’s statement claimed IPT increases made between 2014 and 2017 were “regressive” and “unsustainable”, using the example of a £1,500 policy to show that rates had climbed from £90 at 6% to £180 at 12%.
Simon Rewell, insurethebox’s road safety manager, said: “Telematics has been proven to not only save lives, but save money both for young motorists and for the government through a reduction in pressure on emergency services.
“Removing IPT from this form of insurance therefore makes complete sense.”
Firms claim telematics reduce collisions for young drivers
A study conducted by data and analytics firm LexisNexis Risk Solutions last year revealed the number of 17 to 19-year-old drivers killed or seriously injured in road traffic accidents had fallen by 35% since 2011, compared to 16% for the driving population as a whole.
The company believed the reduction provided “compelling evidence” of the important role telematics insurance has played in cutting road casualties among young drivers, something insurethebox agrees with.
Mr Rewell added: “IPT does not distinguish between traditional motor insurance and telematics insurance, even though telematics insurance has saved millions of pounds in costs related to road collisions – and more importantly saved lives.
“By reducing IPT on telematics insurance to 0%, government will empower young people to take to the roads, improve road safety, and increase its own revenue.
“It is a win-win situation and to ignore the proven statistics is illogical while also limiting social mobility for young people.”
BIBA research claims 0% IPT would make roads safer
Reducing IPT on telematics insurance policies – or making them completely exempt from it – could provide a cost benefit to the UK government, according to BIBA research.
It claims applying 0% IPT tax to telematics insurance policies over seven years would reduce the number of collisions resulting in killed or seriously injured road users to 259.
This reduction, BIBA claimed, would save the government £829m over the period, compared to lost revenue from IPT of £588m – at the current rate of 12%.
How the UK government is addressing young drivers’ risk
Non-departmental government organisation THINK!’s latest Road Whisperer campaign was backed by insurethebox after releasing its own stats to show the increased risk of younger drivers.
The firm analysed 4.5 million miles of driving data from drivers of different age groups and found 17 to 25-year-olds are three-times more likely to crash their vehicle in the first three months of their first annual car insurance policy than in the final quarter.