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Claiming R&D tax relief in the UK insurance sector: making your project budgets stretch further

Chloé Palmer CTA
Associate Director
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The insurance sector is continuously under pressure to innovate. This is in no small part due to regulatory requirements, but many other factors play important roles in the insurtech revolution.

Challenges in the UK insurance sector

Consistent advances in digital transformation within the insurance sector are evidence of the drive to maintain competitive efficiencies. The evolution of personalised insurance products means that customer expectations have never been higher.

All this before anyone has even mentioned the word blockchain.

Innovation in insurance comes in many guises and insurtech innovators in many roles: they might be known to you as lead developers or heads of R&D, or perhaps as your transformation lead. These are the people attempting to overcome significant challenges in insurance IT – perhaps integrating complex systems or developing software to comply with enhanced regulatory requirements.

The work they do is complex and likely involves creating new or modifying existing products and services that look to resolve technological uncertainty.

It is often the case, due to the nature and scale of these projects, that this type of work takes longer than initially expected or runs over budget. Overcoming these types of challenges is fundamental to retaining a commercial edge.

Insurance is a competitive sector where the ever-faster processing, analysis and execution of data operations is integral to the success of companies of any size.

The pace of change is relentless. Rewarding R&D investment? Vital.

R&D in insurance

R&D is prevalent in many systems supporting all parts of the insurance value chain. Even solutions built on commercial technologies can rarely be utilised ‘off the shelf’.

Areas where ForrestBrown sees R&D taking place within insurance innovation include:

Underwriting & pricing

Implementing increasingly complex risk and valuation engines; pricing analytics; extending customer relationship management systems; interfaces to brokers (including APIs); updating and designing system bolt-ons to underwriting platforms.

Actuaries and ‘cat’ risk

Integrating multiple data models and interfaces from internal and external systems, developing mathematical tools and improving the performance of statistical models related to climate change or cyber-security for example, integrating with AIR, RMS, or building data and analytics platforms, tools and governance processes.

Distribution and claim management

Delivering accelerated workflow, transaction and business processing capabilities, brokering connections with external partners systems, with management systems e.g. in document management or integrating with platforms such as Guidewire.


Complying with enhanced UK and EU regulatory requirements and compliance, for example IFRS17, Solvency II changes, internal models, Enterprise Resource Planning (ERP) Development.

What qualifies for R&D tax relief in the insurance sector

Scale-up disruptors as well as large and complex businesses have been at the forefront of driving innovation and transforming the insurance industry.

Here are some examples of innovation that have emerged in this space:

  • Usage-based Insurance (UBI): Developing telematics solutions for UBI involves resolving technological uncertainties. Insurtech companies face challenges in capturing and analysing real-time data from IoT devices, designing algorithms to interpret and assess driving behaviour, and determining the appropriate methodology to personalise insurance premiums accurately.
  • Artificial Intelligence (AI) and Machine Learning (ML): The development and implementation of AI and ML algorithms in the insurance industry involve resolving technological uncertainties. Designing and training AI models, optimising algorithms for claims processing or underwriting, and ensuring accurate risk assessments all require experimentation and research to determine the best approaches.
  • Blockchain technology: Implementing blockchain solutions in insurance entails resolving technological uncertainties. Building secure and scalable blockchain networks, developing smart contract systems, and creating efficient processes for policy management and claims settlement involve overcoming challenges related to data privacy, scalability, and interoperability.
  • Predictive analytics: Developing predictive analytics capabilities in the insurance sector involves resolving scientific and technological uncertainties. Designing algorithms that analyse vast amounts of data, identifying patterns and trends, and developing models that accurately predict risks require research and experimentation.
  • Cybersecurity solutions: Developing robust cybersecurity solutions for the insurance industry involves resolving technological uncertainties. Creating advanced encryption techniques, building threat intelligence platforms, and developing effective risk assessment tools require experimentation and research to ensure their efficacy and effectiveness.

All of these activities can address technological uncertainties and qualify for R&D tax relief.

Ensuring a robust insurance R&D claim

Many insurtech innovations involve resolving scientific or technological uncertainties through research, experimentation, and development. But when claiming R&D tax relief there are times when expert sector specialist or chartered tax advice is key to ensuring a robust and rigorous submission to HMRC. For example:

  • Technological advancement: In some projects, the competent professional (CP) within a business may struggle to demonstrate the novelty or advancement of their projects, especially if they are incremental improvements rather than breakthrough innovations. Experienced sector specialists can help assess the eligibility of projects and ensure that the technological advancement is effectively communicated to HMRC.
  • Time saving and manging your risk also presents a challenge. Claiming R&D tax relief requires detailed documentation of your R&D activities, including technical uncertainties faced, experimentation, and evidence of iterative development. In complex projects, businesses may lack the expertise or time to effectively document, translate and present the R&D process. Engaging an experienced and qualified adviser can help ensure that the necessary documentation is in place to support the claim.
  • Understanding where R&D takes place across your group: While subcontracted R&D expenses can be eligible, the eligibility criteria and associated costs need to be properly accounted for. Expert support can help navigate the complexities of subcontracted R&D and determine the extent to which these costs can be included in a insurance R&D claim.

Examples of R&D in the insurance sector – common R&D projects

We have explored some of the more niche areas of R&D within the insurance sector, but there is a range of more commonplace R&D project themes within this space. Whilst blockchain and AI get the headlines, there is a good chance that projects involving the following activity will likely qualify for R&D tax relief:

  • Implementing complex risk, fraud, analytical functions and valuation engines.
  • Improving operational efficiency, adopting virtualisation, streamlining network communications and enhancing resilience and failover.
  • Integrating multiple data models and interfaces from internal and external systems.
  • Delivering accelerated workflow, transaction and business processing capabilities.
  • Complying with enhanced UK and EU regulatory requirements and compliance; Protecting data confidentiality and integrity.
  • Transforming legacy environments.

Recent changes to R&D tax relief and what they mean for large insurance businesses claiming under RDEC

One significant development for insurance innovators is the increased rate of the RDEC scheme. Large insurance businesses engaging in R&D activities can now enjoy a higher rate of relief. This means that companies investing in innovation can see a more substantial financial benefit, providing a valuable boost to their R&D initiatives. The effective (net) benefit will depend on the company’s marginal rate of Corporation Tax but for main rate taxpayers it will increase from 10.53% to 15%.

Find out more about ForrestBrown’s RDEC service for large companies.

Moreover, the widened scope of qualifying expenditure opens doors to new areas of innovation. Insurance companies can now include data, cloud technology, and pure mathematics in their R&D tax relief claims. This expansion recognises the growing importance of these fields in the insurance industry and acknowledges the value they bring in driving technological advancements and improving operational efficiencies.

For more on pure mathematics, data licences and cloud computing costs and R&D tax relief see our blog.

For insurance innovators, these changes offer an exciting opportunity to explore and capitalise on emerging technologies. From leveraging big data and developing advanced analytics solutions to optimising cloud infrastructure and harnessing mathematical models for risk assessment, the possibilities for R&D-driven innovation in the insurance sector are vast.

By taking advantage of the RDEC scheme and the broadened qualifying expenditure criteria, insurance companies can unlock substantial tax relief while investing in cutting-edge advancements that drive their competitive edge. It’s a chance to showcase their commitment to innovation, enhance customer experiences, and stay at the forefront of a rapidly evolving industry.

How ForrestBrown can help with your R&D insurance claim

When it comes to R&D tax advice for innovators in the insurance sector’s technology landscape, the best approach is one that understands the specific nuances of your business.

At ForrestBrown, we specialise in providing expert advice on your terms. Whether you require comprehensive support for your technology-driven R&D claim or specific expertise on a consultancy basis, we have the knowledge and experience to assist you.

In the rapidly evolving tech-driven insurance industry, R&D activities encompass a wide range of technological advancements. From developing cutting-edge underwriting algorithms to creating advanced data analytics platforms for claims analysis, we appreciate the diverse nature of innovation in this sector. Our flexible approach ensures that we adapt to your specific requirements, allowing us to save you valuable time while delivering a robust R&D tax claim that optimises the benefits for your business, division or company.

Our team of sector specialists and chartered tax advisers will work closely with you to understand the technological uncertainties you face, document your development processes, and identify eligible expenditures. By doing so, we provide comprehensive support, ensuring that you receive accurate and expert guidance tailored to the unique technological challenges in the insurance industry.

Unlock R&D tax relief in the insurance industry with ForrestBrown

ForrestBrown is the UK’s leading R&D tax credit consultancy. We combine Big Four experience with a fresh perspective and experience of working in the insurance sector.

Leverage our insurtech industry expertise for tailored R&D tax relief. Benefit from customised guidance and specialised support.