An insurance company is a financial intermediary whose main line of business is the sale of a particular type of contingent contract, called an insurance policy. Under this contract, [in return for the premium], the insurer promises to pay some amount to the policy-holder, or to some other beneficiary, following the occurrence of an insured event.
For VAT purposes, most countries lump together insurance and financial services rendered by financial institutions. The typical pattern is to include insurance within the definition of exempt financial services. There are some exceptions.
Israel does not tax insurance under its VAT. Rather, it taxes insurance companies under a system administered by the income tax department. The Israeli tax is calculated under an addition method that includes wages and profits in the tax base and does not allow any deduction for VAT paid on business inputs. In effect, Israel imposes tax on the full value of insurance services.
New Zealand taxes insurance other than life insurance under its GST. South Africa and several other countries follow the New Zealand pattern of taxing the value added by property and casualty insurance companies, on the basis of the margin between premiums received and claims paid.