Ahead of tomorrow’s UK budget, Brett Hill, managing director of The Health Insurance Group, has warned that a further increase in insurance premium tax (IPT) could cause people to give up on private medical insurance.
The British Insurance Brokers’ Association (BIBA) has noted that IPT has been collected on insurance policies sold in the UK since 1994 when the rate was 2.5%.
This was raised gradually to a previous high of 6% in 2010. In 2015 the Chancellor revisited Insurance Premium Tax and, between then and now, the amount payable to Government coffers has doubled to a rate of 12% on most types of insurance from June 2017.
Hill said: “The ABI (Association for British Insurers) warned last week that further increases to IPT could add a further £52.50 to the cost of the average private medical insurance policy.
“Although IPT is lower than many other European countries, the Government may believe that increasing IPT is a ‘soft’ option, as customers with general insurance products such as car insurance and home insurance can go to an online price comparison site and shop around for a cheaper renewal quote that might offset the effect of the tax rise.”
However, he added that medical insurance 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.
He commented: “We all know that the NHS is going through a period of acute and rising pressure, as it struggles to cope with the twin challenges of coping with rising demand while pushing through tough efficiency savings.
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.”