“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 medical insurance is a unique product in the general insurance market. It 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. It is also not so easy for medical insurance policyholders to change insurer in return for a reduced premium. Many will have medical conditions for which they have recently or are currently claiming, and so will be unable to change insurer without losing cover for the medical conditions that matter to them the most. These customers will be faced with a stark choice, renew with their current insurer and pay higher premiums that they may not be able to afford, or cancel their policy and go back to the NHS to pick up the bill for treating those conditions.
“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.
“Families who have chosen to pay for private health insurance are already facing challenges in paying their renewal premiums, as household incomes are likely to be squeezed by higher inflation through the course of 2017 caused by the fall in the value of the pound.
“Many of these households also face the prospect of increases in the cost of motor insurance due to the government's announcement this week of changes in the formula used to calculate personal injury claims – an announcement that, incidentally, will impact the NHS when it compensates future medical negligence claims. Adding to these pressures, a further IPT hike will cause an increasing number of customers to reluctantly conclude they can no longer afford the cost of private medical insurance and will instead have to fall back on the taxpayer funded NHS.”
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