NU Online News Service, June 22, 3:45 p.m. EDT

To balance its budget, the United Kingdom government included inits emergency budget an increase in the standard insurance premiumtax rate (IPT) from 5 percent to 6 percent, which insurers say willhurt consumers.

The increase is part of a range of tax increases and spendingcut measures aimed at bringing down the country's budget deficit,according to TMF VAT & IPT Services in the U.K., which providesinternational indirect tax compliance services.

There also is to be an increase in the U.K.'s value-added tax(VAT) from 17.5 percent to 20 percent, beginning Jan. 4, 2011.

A spokesman from the Association of British Insurers said,"Raising IPT is a direct tax increase for the vast majority ofpeople who sensibly protect themselves and their families withinsurance. This is regrettable and could have serious unintendedconsequences if it puts off consumers from protecting their homes,cars, holidays and everyday living."

He explained, "For the average household, a 1 percent increasein IPT will mean an increase of ?7.99 per year ($11.83 at currentexchange rate), from ?839 ($1,242) to ?846.99 ($1,254.64)."

In the past few months, the U.K.'s Treasury had been comparingthe IPT rate with the rest of Europe. This new rate will now moreclosely match many other European IPT levies--although it stillfalls short of Germany's 19 percent and Italy's 21.25 percentrates, TMF said.

Tiger, an online insurance market, said in a statement thatinsurance lobby groups as well as industry experts have made itclear they feel the tax would be detrimental to individuals as wellas small businesses.