Insurance tax hike hits hard
Insurance Premium Tax rises and Brexit are adding uncertainty to the private medical cover picture.
Talking of the 2017 outlook, LaingBuisson economist Philip Blackburn said a sharp increase in the tax had loaded significant additional cost for all medical insurance customers. It rose from 6% to 9.5% from November 2015, with a further rise to 10% from November 2016.
Now another hike to 12% in June 2017 would tighten this ‘taxation straitjacket’.
Mr Blackburn said in an industry where affordability was identified as the primary reason for a lack of growth in demand, this hefty additional burden was likely to mean demand for private medical insurance was vulnerable – although this might be balanced by a shift to healthcare trusts.
LaingBuisson’s latest report, Health Cover 13th edition, found no clear indication to date about the scale of the tax’s impact on the market.
It said much depended on how changes in price shifted demand across customers, and whether many more customers choose different cover options to beat tax-fuelled price rises, such as a larger excess, reduced coverage or favourable switching terms.
The choice and flexibility of medical cover offered by insurers had never been greater, and there was the option of self-insurance for corporates, which was tax-exempt.
Alex Perry, general manager of UK Insurance at Bupa UK, said: ‘An uncertain economic environment and a punishing insurance premium tax increase means we’re continuing our focus on affordability and quality. We have grown our corporate and SME customer base, seeing results from our direct-access offer and employee engagement services including our award-winning Bupa Boost.
‘Affordability and innovation are crucial in attracting more people to health insurance. We need to be bolder as an industry in talking about our contribution to the UK healthcare system.’