Last year's budget made headlines for many reasons, but one of the announcements that went under the radar for most people was an increase in the rate of Insurance Premium Tax (IPT). This increase from 6% to 9.5% took effect from November last year, although most insurance providers are only passing the tax increases on now.
IPT is applicable on many different types of insurance, including Car Insurance and Buildings & Contents Insurance for individuals. This rise will also be bad news for employers who provide their employees with benefits such as Private Medical Insurance (PMI) and Health Cash plans as IPT is due on all of these.
I can’t help but think that the Government has got this wrong. We are led to believe that the NHS is underfunded and under resourced, so anything that encourages individuals to seek private medical treatment should be a good thing. Yet, this increase in IPT is doing the opposite.
With PMI costs typically increasing by 10% each year, this additional cost could well be the tipping point causing employers to start reducing the level of cover provided or increasing the period of time before an employee can join. Either way this would be bad news for employees.
So what can employers do to mitigate against this increase? Well, instead of renewing with the same provider each year, companies can engage with ourselves or other group risk specialists to carry out a thorough review before renewal. Savings can usually be found by playing insurance companies off against each other.
Employers who wish to reduce their PMI costs can consider using a Health Cash plan to run alongside the main PMI scheme. This will provide employees with a range of medical cover for typically 1/5 of the cost of PMI. Cash plans can also be used to pay the excess costs of PMI schemes.
The EB Partnership provides clients with a full annual review of their corporate group risk policies such as Group PMI, so if you would like to take advantage of this service, please let us know.