Riot tax proposal under consideration

A proposed 0.8% "riot tax" on auto and home insurance policies, set to take effect in 2027, could increase costs for drivers and homeowners. The tax aims to create a national fund to cover material damage caused by riots, with the goal of collecting nearly 400 million euros annually. This fund would be managed by the Central Insurance Fund and guaranteed by the State, similar to mechanisms already in place for natural disasters.

Scope of the tax

The tax would apply to all damage insurance policies, including auto and home insurance. It would not cover isolated incidents but only large-scale riots meeting specific criteria, such as a minimum of 700,000 euros in insured damages or 30 incidents each exceeding 10,000 euros. A dedicated commission would assess whether an event qualifies as a riot.

Insurance coverage details

Under the proposal, a "riots and popular movements" guarantee would be automatically included in auto insurance policies. However, the effectiveness of this coverage would depend on the level of insurance chosen by the policyholder. For example, a "third-party only" policy would not cover damage to the policyholder's own vehicle in the event of a riot.

Public perception and insurance choices

According to a study by Leocare and Discurv, 91% of the French believe it is more difficult to find housing today than ten years ago, and 74% now consider their car a luxury. Many are looking at auto insurance as an adjustable expense, with some considering switching to third-party only policies to save money. However, this new contribution would apply to all damage insurance contracts, meaning even those with reduced coverage would still face the tax.

Financial impact of the tax

The 0.8% tax may seem small, but when applied to an annual auto insurance premium of 500 euros, it adds 4 euros per year. For a policy with an 800 euro premium, the increase would be 6.40 euros. This tax would also apply to home insurance policies, potentially affecting multiple contracts for a household. In a context where insurance rates are already rising due to factors like repair costs and inflation, this new line item could be noticeable on billing statements.

Risks of reducing coverage

Some insured individuals may consider reducing their coverage to save money, but switching from an "all risks" policy to a "third-party only" policy would not eliminate the tax. Additionally, a vehicle destroyed during a recognized riot would remain largely uncovered under a third-party only policy, which could be a risky decision given the high cost of replacing a vehicle. Christophe Dandois, co-founder of Leocare, noted that the French are already choosing between essential expenses, and the challenge is to maintain accessible and sufficient insurance coverage.