The government's rationale for increasing IPT is that the market can tolerate it because general insurance premiums have fallen in the past few years. This may be true for certain forms of insurance, but certainly not for PMI, where annual increases of between 10 per cent and 15 per cent are the norm, driven by rampant medical inflation.
This has been compounded by the increase in IPT and research commissioned by Bupa indicates that 200,000 policyholders have left the market since the tax hike began.
We asked Brian Walters, principal at specialist broker Regency Health for an idea of how premiums have increased over the past few years. “Five years ago,” he says, “a comprehensive plan with a £250 excess for a 30-year-old living in the home counties would have cost in the region of £50 a month.
"Looking across the market today, monthly premiums range from £55 to £75, with an average of around £60. If a 30-year-old had stayed on the same policy for the past five years they would likely be paying in the region of £80 a month at age 35, depending on claims history and other factors.”
Looking ahead, Mr Walters only sees pain in store for the market. “Medical inflation is relentless and drives significant annual increases, which are challenging enough for consumers. There is a real fear that the market faces a cliff edge if the government implements a further increase in IPT, which would in turn deepen the crisis in the NHS.
“Even without a further tax increase, premiums will continue to rise, and the subscriber base will continue to erode. There is only so much you can take out of a PMI product before it starts to lose its value, and this is the challenge facing the market as it approaches an affordability crunch.”
Health cash plans
Laing Buisson’s latest Healthcare Market Review (June 2017) reported a very marginal (0.2 per cent) fall in volume demand for health cash plans during 2016, as cash plan policies reached 2.52m, covering 3.43m people, some 5.2 per cent of the UK population.
Employer demand continued to rise strongly, with the number of company-paid cash plan policies reaching a record 1.01m at the end of 2016, up 11.8 per cent.
Health cash plans funded by individuals (employee paid and personal paid) continued to shrink, down 6.8 per cent to 1.51m.
Courtney Marsh, commercial director at cash plan provider Health Shield, says: “Market data from Laing Buisson shows a relatively stable Health Cash Plan market with a growth rate of just under 2 per cent in terms of volume and a slight decline in market revenue in the last three years.
