Insurance Premiums in France 2019

Friday 07 December 2018

A range of indirect tax increases are set to increase insurance premiums on new and existing policies next year.

The impact of indirect taxes on the cost of goods and services in France is often very substantial, as we have seen in such a spectacular manner recently with their impact on fuel prices.

Several separate measures currently proceeding through the French parliament illustrate just how such cost hikes are likely to occur for a range of insurance policies.

Mortgage Protection

In the first measure, the government are proposing abolition of the exemption from a tax is imposed on most insurance contracts used to fund a range of public services, notably departmental fire and rescue services. The tax is called Taxe Spéciale sur les Conventions d’Assurances (TSCA).

Hitherto, mortgage protection insurance policies have been exempt from the tax, but in future they will be taxed at the rate of 9%.

The measure will add several hundred euros to the cost of an insurance policy (around €600 for a 15-year policy €100K), although it will only apply to new policies taken out from January 2019.

Nevertheless, it will make it less attractive for borrowers to make use of a recent relaxation of the rules on changing your mortgage protection insurer. In the past lenders obliged borrowers to take out a mortgage protection policy with them, a requirement that can no longer be imposed.

It is anticipated to generate revenues of around €100m for the public purse.

Car Insurance

Car insurance premiums are also likely to increase due to the need replenish the fund that provides compensation for victims of accidents caused by uninsured motorists.

An amendment to the 2019 Finance Bill provides for an increase in insurers' contributions to the mandatory general insurance guarantee fund (Fonds de Garantie des Assurances Obligatoires de dommages - FGAO). A substantial increase in the tax also occurred in 2017.

The latest increase would provide the FGAO with an additional €33 million per year after an increase of €45m in 2017.

The government estimates there are around 700,000 uninsured vehicles on the road, out of a total of 49 million. Last year 36,000 requests for compensation were opened by the FGAO for accidents caused by insured motorists, when they distributed €85m in compensation to victims. However, recourse against uninsured motorists only recovered €11.6 million.

On a more positive note, from January insurers will be obliged to register all their insured vehicles with a central database (Fichier de tous les Véhicules Assurés (FVA), which will be used to assist in the identification of non-insured vehicles on the road.

Health Insurance

There is also every prospect that complementary health insurance premiums will rise, as a result of the introduction of Le reste à charge zéro» for dental, optical and auditive care next year.

In addition, an increase in the Taxe de Solidarité Additionnelle (TSA) that is imposed on all complementary policies will increase. This tax is used to provide funding the CMU-C, a fund that provides free health insurance for those on a low income. The current rate of this tax is 13.2%, which may increase to 18%.

House Insurance

As to home insurance, prices are expected to increase in 2019 due to the scale of natural disasters (catastrophes naturelles) in recent years, such as severe floods and storms, and the increase in the fund to support victims of terrorism, called the FGTI (Fonds de Garantie des victimes d'actes Terroristes et d'autres Infractions), also known as the 'terrorism tax'.

The annual amount of compensation for victims of terrorist attacks has increased by more than 30 times since 1994. In 2017 the FGTI paid more than €314 million to victims of criminal offences.