A study has shown that nearly 200,000 people have been forced to ditch health insurance policies over the past three years, as insurance premium tax (IPT) has increased fivefold since its introduction – leading to an increase in premiums.
Levied on most insurance policies, IPT was introduced in 1994 at 2.5%; today, it stands at a hefty 12%. The Association of British Insurers (ABI) has calculated that IPT adds around £283 a year to a typical household’s annual insurance bill.
The Centre for Economics and Business Research (Cebr) conducted the study on behalf of healthcare provider Bupa, using data gathered from 2003 to 2017. Cebr has estimated that every 1% increase in IPT has led to around 31,000 people moving from private to NHS-funded care – putting even greater strain on an already stretched health service.
Short-term benefits mean that the government will gain around £5.8 billion a year through the increase in IPT – although there are no current plans to reinvest this into the NHS. However, long-term revenue from the tax could actually decrease, as people are put off from taking out insurance policies.
For those who have been forced to give up private healthcare plans, it means being denied access to specialist treatment they may have previously had access to. Bupa also makes the point that IPT increases would affect those who were more likely to need medical treatment, such as older people and those in ‘high-risk’ categories, as their premiums were (as a general rule) more expensive than average.
The increase in IPT and the effect on insurance premiums shouldn’t mean having to choose between health and wealth. Compare health insurance to find the right level of cover for you at a price you can afford.