Insurance Premium Tax (IPT) is certainly a hotbed issue in the insurance industry. Still reeling from the implementation of the Ogden rate cut, insurers face a rise in IPT to 12% as of June 01, 2017 – meaning it will have doubled in less than two years.
However, as if that wasn’t enough, the Labour Party has suggested, as part of its pre-election manifesto, that it will increase IPT to 20% in order to finance free parking across hospitals in England. Surely this is a possibility that will place insurers into a rage?
Perhaps not, however.
Speaking at the BIBA conference last week, one source told Insurance Business that the proposal was a good idea – that it actually made sense to implement a firm 20% rate so that insurers “would know where they stand” rather than dealing with gradual increases year after year which they have to constantly adjust their business to.
However, Brett Hill, managing director of the Health Insurance Group, took a different stance believing that while the pledge is “well-meaning”, it would “inevitably exert excessive pressures on an already overloaded NHS service.”
“With medical insurance premiums typically increasing by 10% per annum once medical inflation (6%) and age-related increases are taken into account, an additional 8% hike in IPT… would result in most customers seeing premium increases of 20% or more,” he pointed out.
According to Hill, private medical insurance (PMI) should not just be seen as a “luxury for a privileged few,” with around 10% of the population currently covered by private medical healthcare plans – albeit the bulk are covered under employer schemes. With many, however, being retirees, or those on a fixed income, a premium hike could deal a difficult blow to take.
“A 20% premium hike in a single year will inevitably result in many of these customers having to abandon their cover completely, and fall back on the NHS to treat medical conditions that were previously covered by their insurance,” he explained. “This will only heap yet more pressure on the very system that the policy is intended to support.”
With an IPT hike set to impact other areas of insurance too – including car insurance – we want to know where you stand on this Labour policy? A good idea or missing the point? Leave a comment below with your thoughts.
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