PMI needs IPT increase 'like a hole on the head' - LaingBuisson

clock • 3 min read

The number of private medical insurance (PMI) policies held in the UK has dropped by 30,000, leading LaingBuisson to describe the insurance premium tax (IPT) hike as needed ‘like a hole in the head'.

The LaingBuisson's Health Cover UK Market Report - twelfth edition puts the number of PMI policies in the UK (insured and self-insured) at 3.94 million at the start of 2015, down from 3.97 million a year earlier.

Between 2012-2014 policy numbers have fallen 9% beneath a peak of 4.32 million in early 2008, LaingBuisson's report has shown. 

Philip Blackburn, author of the report said: "Private medical insurance needs a 3.5 percentage point rise in IPT like a hole in the head, and this additional cost is projected to dampen market demand in 2016 and 2017".

In the 2015 Summer Budget, chancellor George Osborne had announced that IPT would rise from 6% to 9.5% by November

Meanwhile, LaingBuisson also highlighted that the amount of people covered by the private medial cover dropped to an approximate 10.5% in early 2015 in comparison to 12.3% six years previous.

There were related falls of about 14,000 for both individual and company paid policies during 2014, the report said.

The report also revealed a lack of expansion of employer funded demand in the previous four years while a 5% growth in full time employees in the UK have reached record levels.

Costs and claims 

LaingBuisson also identified that the increase in IPT would affect insurers' abilities to manage costs which will affect market growth. 

The report also found that the IPT uplift came "after brighter prospects" for medical cover growth a year ago.

Claims costs had fallen by 5% in real terms (taking into account economy inflation (RPI)) in 2013 - the first significant contraction in recent history.

Contributing to this fall was effective cost-containment, highlighted by Bupa's open referral and similar initiatives from others. 

The report found that this sharp drop in claims costs was not repeated in 2014, as medical cover payouts edged down by 0.8% in real terms to be £3.45 billion.

It added while the impact of cost-containment was again evident during the year, there was upward pressure on costs as claims incidence rose across the industry as a whole.

PMI "at a crossroads"

Blackburn added:""Private medical cover is currently at a crossroads. A lack of growth in volume demand when the UK economic cycle is at a strong point, suggests there are barriers to a wider market which need to be addressed.

"While tackling high costs of cover needs to be an ongoing priority for everyone within the private healthcare industry, demonstrating the financial benefit of private healthcare to employers would appear imperative for long-term market prosperity."

He concluded: "To this end investment in the value of private healthcare is required from insurers, hospitals and doctors alike.

"However, while the medical cover market has recently seen some progressive achievements on cost management, a regressive step has now been delivered by the government.

"Private medical insurance needs a 3.5 percentage point rise in IPT like a hole in the head, and this additional cost is projected to dampen market demand in 2016 and 2017".

Cash plans 

Meanwhile, LaingBuisson said of health cash plans that "employer demand is surging forward." 

While its penetration remains much lower than private medical cover, the number of employer paid health cash plan contributors increased by 12% in 2014 to reach a high of 833,000 at the start of 2015.

The number of company paid cash plan contributors (policies) has more than doubled between 2010-2014, encouraged by an average price which has not increased over the period.

This was "underpinned by a sales drive from intermediaries keen to grow a progressive market", the report siad. 

Meanwhile, individual demand for cash plans continued to edge down in 2014, falling by 2.4% to be 1.81 million individual paid contributors at the start of 2015.

However, this was the smallest annual fall in seven years, and suggests stable demand from individuals may be approaching, LaingBuisson concluded. 

Further Reading:

The IPT earthquake sending shockwaves to PMI sector

AXA PPP completes Simplyhealth PMI acquisition

Exeter Family Friendly Offer Two Months Free PMI

Health Shield will absorb cost of IPT increase

 

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