The five principles guiding multinational insurance tax calculation

Six years ago TMF Group set about building a multinational insurance tax calculator; we’d seen that there was a gap in the market that needed filling.

IPT Quote is now a market-leading product with more than 5000 users around the globe. Our head of IPT services talks through the five straightforward principles that guide multinational insurance tax calculations.

1. Get your tax rates correct

There are well over 200 jurisdictions around the world that have a tax regime applying to insurance contracts. Within a single territory there can be several types of tax, and within a tax type there can be various tax rates that apply across the different insurance classes. As a consequence, there are in excess of 30,000 tax rates in the IPTQ database. To populate the database in the first place and to keep it updated on an ongoing basis, reliable sources of information have been key. TMF Group’s global network of 100+ offices gives us the coverage we need to keep abreast of the ever changing world of insurance tax regimes.

2. Get your calculations correct

It’s not only the tax rates that vary across insurance classes and types of tax; there are many weird and wonderful tax calculation methodologies that the tax authorities have devised to keep us on our toes. From Spanish Consorcio to French Gareat to the Home State rules for US non-admitted business, there are technical challenges that abound. Getting the calculations to work as stand-alone can be hard enough, let alone embedding them within a multinational co-insurance programme with more than 100 risk locations and written across multiple lines of business. Our development team has been fine-tuning the calculation engine since the very beginning, so it can quickly and accurately handle the many thousands of simultaneous calculations that are required to generate tax schedules associated with the most complex global programmes being written today.

3. Listen to your potential clients (and win them as new clients!)

IPTQ was born out of close collaboration with the London insurance market. Initially driven by the broking community, we sat down with our then-potential clients to understand what their requirements were. We did this many times (as we continue to do) and we built what the market – and ultimately the front-end user – was asking for. In 2011, LIIBA (The London and International Insurance Broker’s Association) conducted a comparison of the various insurance tax calculators that were available at the time and endorsed IPTQ to its members. This success was a direct result of listening carefully to and delivering what our clients wanted, and we backed this up with a competitive pricing model to encourage people on board.

4. Make the system easy to use

It sounds obvious, but multinational insurance programmes and their resultant tax schedules are by their very nature far from simple, so achieving this objective has not been that straightforward. Our user-centred development focus has been pivotal in understanding the complexities and refining the ease of use. We have tried and succeeded to make insurance tax more accessible to a wider cross-section of potential users, thereby enabling organisations to diversify knowledge across their staff.

5. Be responsive and adapt with the market

The requirements of IPTQ are ever-changing as the insurance market evolves. One way we keep on top of this is through the IPT Quote Steering Group, a quarterly forum for our key broker and insurer clients to discuss system developments and challenging tax regimes. The group helps guide our strategy, enabling us to effectively adapt with the market.  Not only must we adapt, we must be responsive to critical issues; it would be churlish to claim that every single tax rate has always been correct and correspondingly every single tax calculation. But whenever there is an issue or a query received by the IPTQ Helpdesk we make sure we investigate right away.

What's next for IPT Quote?

This year we will be developing the product further so that it becomes an end-to-end tax compliance tool. It was TMF’s IPT compliance offering that originally kick started our IPT Quote journey and this will be the topic of future commentaries as we explore the tax regimes of some of the more interesting jurisdictions around the world.

Read more about Insurance Premium Tax and our IPT Quote service.

Image of Paul Hampton, Head of IPT at TMF Group
Paul  Hampton
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