VAT hikes, trade shocks and the short-term insurance squeeze

THE short-term insurance industry is facing increased pressure from two directions: proposed domestic tax hikes and global trade uncertainty. Taken together, these developments are likely to deepen financial strain on policyholders while simultaneously threatening the growth and stability of the insurance sector itself.

- MATTHEW GEZANE

The Finance Minister's proposal to incrementally increase VAT - from 15% to 15.5% in 2025 and then to 16% in 2026 - will directly affect the cost of financial services, including short-term insurance. Insurers have begun giving notice of increases to policyholders, given that VAT is a compliance requirement (and thus does not provide them with additional revenue). The result: higher premiums for policyholders at a time when household incomes are already under pressure from sub-inflationary wage growth and rising living costs.

For businesses, the situation is no less complex. Earlier this year, the United States announced a 31% tariff on South African exports - since paused for 90 days, but with a 10% flat-rate tariff still in effect.