The price of your insurance policy – home, car, funerals, etc. – is made up of three parts. First of all, the net premium; this is the price stipulated by the insurance company that assumes the risk to be covered. Secondly, the Insurance Compensation Consortium rate (the public body that reports to the Ministry of Economy, Industry and Competitiveness) that covers extraordinary risk situations. And finally, the Insurance Premium Tax (IPS): an indirect tax that is collected at the time the premium is paid, either in installments or in a single payment.
A significant increase
On January 1, a 2% increase in the IPS went into effect, going from 6% to 8% and affecting car, home, community of owners, death, legal defense and civil liability policies. The insurance sector does not agree with this decision. UNESPA, the sector’s employers’ association, has repeatedly repudiated this increase, describing it as “disproportionate and lacking justification”, in the words of its president, who believes that this price increase may lead to reduced protection for families and companies and, consequently, greater exposure to risk.
In line with Europe
But how can the government justify this rise? Basically through two arguments: this tax rate has not changed since 1998 and it is lower than in other European countries. In Germany, for example, this rate stands at 19%, in the United Kingdom at 12.5%, and in Italy between 12.5% and 21.5%.
How will this affect consumers?
How much money are we talking about? An increase in a family’s average insurance bill of between 28 and 30 euros per year. According to the Family Budget Survey, 95% of families have some form of insurance policy, the most common being automobile (79%), home (74%) and death (45%). Likewise, companies that have taken out insurance liable for this charge will also be affected.
An unequal impact
Who is going to bear the brunt of this rise? Insured parties or insurers? UNESPA says that this will depend on the commercial policies of the insurance companies: “each one will have their own policy, and to the extent that they will try to mitigate the impact on their clients.” The impact of this measure has been valued by the Government at about 455 million euros, which represents an increase of almost 25 percent in revenue from this tax.
