Slovakia’s parliament passes insurance tax law

The parliament has approved a bill on the new 8% general insurance tax that will be introduced as of Jan 1, 2019. The new tax will replace the current 8% levy in all segments of non-life insurance, except for mandatory contractual insurance, where the levy will be kept. The insurers will be also obliged to inform clients about any new insurance premiums 10 weeks before the insurance period expires, which will secure their clients enough time to decide whether to accept or not the new insurance premiums. The new tax will bring about EUR36m per year to state coffers. The bill faced significant opposition from insurance companies that claim the bill is retroactive. Opposition was also voiced by several employers’ organizations.

According to the finance ministry, the tax is a standard EU tool and clients of insurance companies are not likely to face any significant changes. The tax will be paid by insurers, which means that no amendments to current contracts will be necessary. The ministry claims that the insurers will have to possibly optimise their operations, cut costs or profit margins to maintain the insurance fees for clients at their present level. However, the insurers complain that the change will affect adversely their budgeting and will hurt consumers, who might face higher fees.

In the meantime, the parliament on Wednesday also approved new rules for financial intermediaries along with several novelties for the financial market as part of an amendment to the insurance law. According to the finance ministry, the aim is to boost transparency and clarity of costs of distribution of financial products, to regulate remuneration of financial intermediaries, and regulate the determination of the redemption value in life insurance. However, the regulation of the remuneration of financial intermediaries does not apply to commissions for mediating housing loans. Now that the amendment is passed, the clients of commercial banks and insurance companies will be provided forms with clear and comprehensible information on the main items being included in the price of financial products. The amendment also introduces direct regulation of the remuneration of financial intermediaries in the banking sector, setting a ceiling for the financial agent’s remuneration for loans at up to 1.5% of the value of the credit, which will be paid to the intermediary in equal instalments once a year for three years. The new legislation is to enter into force as of July 2019.

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