Private medical insurers have slated the government’s insurance premium tax (IPT) hike to 12 per cent, which comes into effect today (1 June) only eight months after it rose to 10 per cent.
The tax is payable on most general insurance policies including home, motor, pet, private medical insurance and cash plans taken out by individuals, as well as commercial insurance taken out by businesses.
According to the Association of British Insurers, those with private medical insurance and cash plans could face an extra £39 a year on their premium.
This latest hike will mean that the government will rake in £5.8bn a year from insurance premium tax, according to the ABI
James Dalton, director of general insurance policy at the ABI, said: “With a doubling of insurance premium tax in just under two years it is time to call a halt to this raid on the responsible.
"This tax penalises hard working families, as well as businesses, who have done the right thing by taking out insurance to protect against many of life’s uncertainties. This latest hike must be the last. The next government must freeze this tax to give hard working households and businesses a break.”
Brian Walters, principal of Cheltenham-based medical insurance brokers Regency Health, said: "The latest insurance premium tax increase heaps more pressure on the private medical insurance market, which is already approaching an affordability crunch.
"There was a 15 per cent contraction in the private medical insurance subscriber base between 2008 and 2015, which will be a contributory factor to current NHS waiting lists.
"Private medical insurance premiums increase by around 10 per cent each year for age and medical inflation anyway, which has been compounded by successive insurance premium tax increases and shopping around isn't always possible for private medical insurance policyholders due to pre-existing conditions."
Hannah Tasker, general insurance manager at First Complete and Pink., said the third insurance premium tax rate increase in two years is just the latest small increase that has impacted on the end customer.
Ms Tasker said: "If the rate of insurance premium tax continues to rise, this will then impact the affordability of the perceived value of insurance against cost.
“The price of insurance can drive a customer to buy the cheapest or the lowest value option. It’s not in anyone’s interest to make insurance unaffordable and with speculation that insurance premium tax could rise to a staggering 20 per cent this is exactly what could happen.
"The alternative, with potentially dangerous consequences, may be that insurers look to reduce the levels of cover they offer or even what’s included within their policies in order to remain competitive. Ultimately, this will impact the quality of product that is provided to customers.”