16 November 2017

Comment from Brett Hill, Managing Director of The Health Insurance Group ahead of Autumn Budget November 2017

Brett Hill, Managing Director of The Health Insurance Group comments, “In two years the Government has increased Insurance Premium Tax (IPT) three times. A further increase in next week’s Budget could cause people to give up on private medical insurance and fall back to the NHS which is already under resourced and struggling to cope.“

At the start of 1994, IPT was just 2.5 per cent. Since January 2015, the rate has doubled from 6 per cent to 12 per cent in June 2017. The Association of British Insurers (ABI) is also urging the Chancellor to end the repeated increases, which apply to motor, household, pet and health insurance policies, saying it is punishing responsible people.

Brett continues, “IPT in the UK is now the sixth highest in Europe and the Government clearly believes that increasing the tax is a ‘soft’ option.  In fact, sustained rises only serve to punish individuals, families and businesses for doing the right thing in protecting their homes, health and belongings.

“Within the general insurance market medical insurance is a unique product. It is the only general insurance product where customers have access to a free alternative in the form of the NHS, paid for by the tax payer. It is also not so easy for medical insurance policyholders to change insurer in return for a reduced premium (as opposed to shopping around for a cheaper motor quote, for example). Many will have medical conditions for which they have recently or are currently claiming, and so will be unable to change insurer without losing cover for the medical conditions that matter to them the most. These customers will be faced with a stark choice, renew with their current insurer and pay higher premiums that they may not be able to afford, or cancel their policy and go back to the NHS to pick up the bill for treating those conditions.

“The NHS continues to face acute and rising pressures on its limited resources, and evidence suggests that waiting times are beginning to rise for many procedures, such as hip, knee and cataract operations. It is counterproductive for the government to increase the demands on the NHS still further, yet it risks doing exactly that by pushing through tax increases that could force ever more people to opt out of private medical insurance.”

Recently, Simon Stevens, Head of NHS England warned that waiting lists will soar to five million by 2021 – the highest ever – without extra funding. With four million patients currently on the waiting list, he said that an extra million will result in one in 10 patients in England being denied timely operations.

“Families who have chosen to pay for private health insurance are already facing challenges in paying their renewal premiums, as household incomes are likely to continue feeling the squeeze through the course of 2018 due to a combination of higher inflation and increasing interest rates.“

Following the increases to IPT in 2015, the number of people paying for private medical insurance fell by almost 20,000 in the space of just one year. If IPT on medical insurance premiums were increased again it’s likely there would a further fall in the number of people who can afford to pay their annual premium.[1]

Brett concludes, “It may take two to three years before the full impact of the IPT increases is seen fully in the market, but the falling number of people renewing annual premiums is certainly worrying. Historically corporates have met the increasing costs, but this may also change in the medium to long term if rate rises continue.”

[1] LaingBussion Health Cover fourteenth edition.