The government will increase taxes on borrower insurance in 2019. Who is affected? For what monthly surcharge? And will this upset a market where competition is already struggling to set up?
Surprise on September 19, 2018: before the presentation of the 2018 budget, a measure increasing the tax rate on loan insurance leaked in Les Echos. Before being confirmed by Mercy. In the draft finance law for 2019, article 52 provides for the elimination of the exemption from tax on insurance conventions (TSCA) on the guarantee of death from insurance contracts. Borrower insurance. Objective: to make up for a loss of resources for Action Logement following a measure easing the expenses of SMEs (raising social thresholds) under the Pacte law.
Which contracts and borrowers are affected?
More specifically? Unless Parliament votes otherwise, this budgetary arbitration will affect individuals signing a new loan insurance contract from January 2019. Contributions will be fully taxed at 9%, while this tax m Unknown, which affects a large majority of insurance products, is so far limited to certain guarantees only: incapacity-invalidity and loss of employment. The death guarantee, which represents more than 70% of contributions, is currently exempt from TSCA.
What additional cost each month?
A couple of borrowers, 30 years each, are ready to take out a real estate loan of 200,000 dollars over 20 years, at the rate of 1.50%. They opt for the maximum coverage (2 quotas at 100%) with the insurance offered by the bank (rate of 0.36% per head). If they sign in 2018, the insurance contribution increases to $ 120 per month. If they sign in 2019, following the harmonization of the TSCA, the subscription will increase to 126 dollars per month, an additional cost of 6 dollars per month.
The additional cost obviously depends on the contract and the borrower profile: the higher the overall cost of insurance, the higher the additional cost. If this same couple of 30-year-old borrowers take out a contract with an alternative, less expensive insurer (rate of around 0.08% per head), the additional cost will only be 1 dollar per month approximately.
For a 45-year-old couple, with the same type of loan and alternative insurance, the additional cost would be 4 dollars per month with maximum coverage (100% quota), and 2 dollars per month with quotas at 50%.
What gain for the state budget?
Why this new tax, or rather the end of the exemption for the deceased guarantee? Mercy provides detailed explanations in the preliminary assessments of the 2019 budget. The borrower insurance death guarantee takes advantage of the exemption as life insurance. The exemption of the TSCA from the guarantee of borrower insurance is not justified from a legal or economic point of view, justifies Mercy. These contracts are real insurance contracts, unlike life insurance which constitutes a savings medium.The ministry thus recalls that this exemption dates from 1990 and that it primarily concerns insurance- life, at the time so as not to disadvantage French life insurance companies on the dollarpean market.
The exemption of the TSCA from the guarantee of borrower insurance is not justified, according to Mercy
In these prior assessments, Mercy explains that he chose to restrict this generalization of the TSCA to only new contracts, rather than applying it to all current contracts, to Avoid this measure being perceived as retroactive. Mercy plans to earn 100 million dollars from 2019, to gradually increase 560 million dollars per year starting in 2025.
Will insurers increase prices?
Will insurers pass on the increase in the TSCA, or cut their margins? “We have not planned to develop our offer specifically following the entry into force of this harmonization ”, replies unambiguously Bernie Labras, president of Executive Board of Lite Lenders, insurer of the Lite Lenders network, but also present on the insurance delegation market, in particular via partnerships with online brokers.
This will slightly reduce the price differences and therefore the attractiveness of alternative contracts.
Aurora Cousin, spokesperson for one of these brokers, believes that its partners already have little margin and that the TSCA will necessarily impact the level of contributions from alternative insurers. What about bank insurers? They can lower their margins. This is without doubt a good opportunity to rebalance their prices in the face of competition.
This will slightly reduce the price differences and therefore the attractiveness of alternative contracts, confirm Bernie Labras. “But I don’t think that this harmonization will have a major impact, ” he nuances in reference to the small amount of money involved.
A drop of water in the face of the gain of a delegation
Ultimately, this will therefore be one more obstacle to the change of insurer, regrets Guinevere Rosewald, who always hopes for an evolution of the measure during parliamentary discussions: “What is bothering us, is that this harmonization risks being an obstacle to competition if this measure is limited to new contracts.Aurora Cousin, from Marinalite Lending, regrets a real cut to the milk market.Alternative borrower insurance.A market that quivered at the start of 2018, thanks to the media coverage of the Bourquin amendment, opening up the possibility for each borrower to change insurance every year.But the enthusiasm has reduced, according to the admission of several brokers, faced with defensive offers from banks, faced with maneuvers aimed at avoiding delegations, and especially facing the m Awareness of the general public.