LV= has clarified for advisers its view on the effect of removing I-E accounting practice.
The Mark Jones, head of protection at the insurer, gave a brief overview of I-E during COVER Magazines recent webinar on the Gender Directive and other factors which will lead to the heavy re-pricing of protection products just before Christmas.
However, adviser feedback at the time requested clarification on how it impacts on gender neutral re-pricing.
With this in mind Jones said: "The ‘I-E' (which is Investment income and chargeable gains minus Expenses) taxation regime currently allows insurance companies to offset the costs of their life insurance business against their investment income, for example with profits business.
"This is being removed at the end of 2012. It will result in some insurance companies paying more tax, thereby increasing costs and inevitably leading to higher prices for their customers.
"In March 2012, the Actuarial Profession indicated that the taxation change could lead to an increase in new life and critical illness premiums (as most critical illness is combined with life cover) of around 10%.
"However, not all providers are impacted to the same level, as they will have varying amounts of investment income available to them.
"An argument in favour of the change is it will remove a barrier to entry, as currently a new entrant into the market without an investment back book is at a competitive disadvantage.
"This I-E tax regime doesn't affect income protection.
"Whilst a number of factors affect premiums and the scale of change will vary by individual, we foresee that any ‘gains' from the Gender Directive are likely to be largely offset by the I-E changes.
"From 2013, we can expect that most people, with the exception of women buying income protection, will end paying higher premiums when they take out cover."
