Navigating Insurance’s Digital Highway Copy

Christophe Bourdaire
January 20, 2021

This blog was last updated on January 20, 2021

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

2025 tax filing season
North America Tax Information Reporting
November 21, 2024
Top 5 FAQs to Prepare for the 2025 Tax Filing Season

This blog was last updated on November 21, 2024 While “spooky season” may be over for most of us, the scariest time of year for many businesses is right around the corner: tax filing season. As they brace themselves for the flood of forms, regulatory updates, and tight deadlines, the fear of missing a critical […]

dtc shipping law updates
North America ShipCompliant
November 13, 2024
DtC Shipping Laws: Key Updates for Alcohol Shippers

This blog was last updated on November 13, 2024 When engaging in direct-to-consumer (DtC) shipping of alcohol, compliance with different state laws is paramount and so keeping up with law changes is critical. In 2024, the rules in several states for DtC have already been adjusted or will change soon. Here is a review of […]

sales tax vs. use taxes
North America Sales & Use Tax
November 8, 2024
Sales Tax vs. Use Tax, Explained. Who Reports What, and When?

This blog was last updated on November 19, 2024 One of the core concepts in sales tax compliance is also one of the most frequently misunderstood: the differences between sales tax and use tax. These tax types may look similar on the surface, but knowing the differences is essential for staying compliant and avoiding costly […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
2025 NAIC Bond Project – The Insurer’s Guide

This blog was last updated on November 14, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
VAT in the Digital Age Approved in ECOFIN

This blog was last updated on November 7, 2024 The long-awaited VAT in the Digital Age (ViDA) proposal has been approved by Member States’ Economic and Finance Ministers. On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed on adopting the ViDA package. This decision marks a major […]