Navigating Insurance’s Digital Highway

Christophe Bourdaire
September 16, 2020

From underwriting to reporting, the insurance industry is having to adjust and by choice or imposed, is embracing the digital evolution of its practices. On the reporting front, more tax authorities are forcing insurance companies to tailor their internal processes by jurisdiction, directly impacting the collection of information at the underwriting stage. Digitized services continue to rise making it even harder for insurers to find the most tailored solution to meet their needs.

Tax filings used as pre audit tool

As we’ve seen in recent years, tax authorities are moving all their tax filing processes online. Insurance premium tax (IPT), is following the trend and, within the European Union for instance, paper filing is no longer the norm. Some tax authorities have opted for simplified online processes, like in the UK, where IPT is filed on a consolidated basis and the recent feedback from HMRC on its IPT Call for Evidence suggests this way of filing will remain. Other jurisdictions, such as Portugal, have taken the opposite approach by asking insurance companies to provide as much detail as possible on their transactions and policies. This adds administrative burden to the insurance market but should facilitate the audit work of tax authorities. Indeed, with all the tax information collected upfront, tax authorities should have a fair amount of data to allow them to track the level of activities not only of insurers but also of insureds. This transactional approach might also initiate the transition to the next compliance challenge: e-invoicing.

The challenge of e-invoicing

While IPT filing is moving online, other taxes such as VAT have already engaged in the next phase of their digital journey: e-invoicing. The number of tax authorities implementing so-called clearance systems, where invoices are submitted to the tax authorities for validation before being issued to the buyer, is fast increasing. Whilst clearance systems are common in Latin America, more regions are waking up to the benefits they present to tax authorities in closing tax gaps and increasing efficiency including, for example, Italy in 2019 and Turkey this year. For insurance, the question is: if tax authorities extend e-invoicing clearance systems to insurance premiums, will insurance companies be able to comply? Such an obligation could probably be met for domestic companies selling private insurance such as motor or home insurance in the short term.  For insurers or captives writing global programs, it would be far more challenging and require extensive knowledge of all tax jurisdictions and in particular the e-invoicing formats accepted by the different tax authorities. If this is what’s coming next, the insurance industry should start to prepare and embrace the change to their advantage rather than feel it’s imposed.

The limit of digitization

With digitization on everybody’s mind, the temptation to invest in sophisticated software solutions is at its peak. The insurance industry is often singled out for its outdated software infrastructure, which makes it a key target for digitized services providers. But this can result in numerous fragmented software solutions being implemented in-house, complicating internal processes and causing inefficiency when complying with tax authorities’ reporting requirements. A single software solution to meet all needs from client and claims management to tax filing obligations, remains a fantasy at the moment. It’s therefore paramount that insurance companies adopt a digital strategy across departments and opt for the most agile and flexible software solutions that can not only meet today’s compliance needs but also tomorrow’s evolutions.

Take Action

Keep up to date with the ever tax changing landscape by subscribing to our blogs and following us on LinkedIn and Twitter. We also host regular webinars with our in-house specialists who are on hand to help.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Christophe Bourdaire

Senior Regulatory Specialist, Regulatory Analysis. Christophe joined Sovos FiscalReps in 2011 and has been managing the IPT compliance process for a portfolio of captives and French speaking clients. Based in France, he focuses on the development of the global IPT content and technology offering. Christophe completed a degree (certificate) in Journalism at Ecole Nouvelles in Nice, France. He is a native French speaker, and also speaks fluent Spanish.
Share This Post

LATAM VAT & Fiscal Reporting
May 20, 2020
Sovos Acquires Taxweb, Extends Tax Determination Capabilities in World’s Most Challenging Compliance Landscape

Earlier this month Sovos announced its second acquisition of 2020, completing our solution for Brazil with an unparalleled offering that solves tax compliance in the place where it is most challenging to do so.  Too many companies doing business in Brazil have been burdened by managing multiple point solutions for continuous transaction controls (CTCs), tax […]

ShipCompliant
September 24, 2020
Ask Alex: Your Bev Alc Compliance Questions Answered (September 2020)

Do you have questions about the rules, regulations, and compliance requirements of the beverage alcohol industry? This series, Ask Alex, is a perfect opportunity to get those pressing questions answered straight from one of the industry’s regulation and market experts, Alex Koral, Senior Regulation Counsel, Sovos ShipCompliant.  To take advantage of this opportunity and get […]

EMEA VAT & Fiscal Reporting
September 24, 2020
Oman to Introduce VAT

Oman is on its way to introduce VAT. After the approval of the State Council and the Shura Council the draft law was sent for final approval to Sultan Haitham Bin Tariq Al Said. If the draft law is approved, VAT is expected to be implemented in 2022. Background Gulf Cooperation Council (GCC) member states […]

EMEA VAT & Fiscal Reporting
September 23, 2020
Three Key Reasons to Appoint a VAT Compliance Managed Service Provider

With a VAT gap across EU countries estimated at €140 billion in 2018, tax authorities are continuing to take steps to boost revenues, increase efficiency and reduce fraud.  As a result, VAT compliance obligations are becoming more demanding and failure to comply can not only result in significant fines but also reputational damage. Many multinational […]

Tax Compliance Tax Information Reporting United States
September 22, 2020
2020 GCS Speaker Spotlight Series | KPMG & Zions Bancorporation

Sovos’ Global Compliance Summit – Intelligent Reporting “Speaker Spotlight” Series kicks off with the introduction to two brilliant women in the world of tax, Kelli Wooten of KPMG LLP and Susie Jensen of Zions Bancorporation, who will be attending & presenting at our upcoming conference in early October. These two professionals are particularly well-versed in […]

EMEA IPT
September 22, 2020
The Benefits of Insurtech to Captive Insurers

Tax filing, wherever you are in the world, is becoming increasingly complex, with regular rate updates and governments eager to close tax gaps via new mandates that demand real-time reporting. Despite this, many captive insurers still rely on resource-heavy, manual procedures to capture, validate and process large volumes of data. As well as taking significant […]