As we dive into the complex world of UK fiscal policy and insurance trends, I’m thrilled to speak with Simon Glairy, a renowned expert in insurance and Insurtech, with deep expertise in risk management and AI-driven risk assessment. With years of experience navigating the evolving landscape of insurance premiums and taxation, Simon offers invaluable insights into how these factors impact both government revenue and everyday consumers. Today, we’ll explore the nuances of Insurance Premium Tax (IPT) collections, the surge in private health insurance demand, and the broader implications for businesses and individuals alike.
Can you walk us through what Insurance Premium Tax (IPT) is and why it plays such a crucial role in the UK government’s revenue stream?
Absolutely, Benjamin. Insurance Premium Tax, or IPT, is a tax levied on most general insurance premiums in the UK, covering things like car, home, and health insurance. It’s charged at a standard rate of 12% on most policies, with a higher rate of 20% for certain products like travel insurance. For the government, IPT is a significant and reliable source of income because it’s tied directly to consumer and business spending on insurance—a necessity for many. It contributes billions annually to the Treasury, helping fund public services. Its importance lies in its stability; even in economic downturns, people and businesses tend to maintain essential coverage, ensuring a steady flow of revenue.
Looking at the recent data, IPT collections dropped by £51 million year-on-year for August 2024. What do you think might be behind this dip?
That’s an interesting shift, and I’d point to a few potential factors. First, there could be a temporary slowdown in insurance purchases or renewals—perhaps due to economic uncertainty causing consumers to delay non-essential policies. Second, we might be seeing insurers or policyholders adjusting to cost-saving measures, like opting for lower coverage or higher deductibles, which reduces the taxable premium. It’s also possible that seasonal trends play a role; August might reflect a quieter period for certain insurance products. I don’t think it’s necessarily a long-term concern, but it’s worth monitoring alongside broader economic indicators.
Despite that monthly decline, cumulative IPT receipts for the first five months of the 2025–26 financial year are up by £72 million compared to last year. What’s fueling this overall increase?
The year-to-date growth reflects a robust demand for insurance, particularly in health-related products. As more individuals and employers seek private health coverage—often due to challenges accessing timely NHS care—the volume of premiums subject to IPT naturally rises. Additionally, inflation and rising premium costs mean even existing policies generate higher tax revenue. Beyond health insurance, other sectors like property and motor insurance likely contribute as well, driven by asset value increases and regulatory requirements for coverage. It’s a clear sign that the insurance market remains a strong pillar for Treasury inflows.
There’s been a noticeable trend of people turning to private health insurance due to difficulties with NHS access. How significant is this shift in behavior?
It’s a pretty substantial change, Benjamin, and it speaks to deeper systemic issues. Long waiting times for NHS appointments and treatments—sometimes stretching months or even years for non-urgent cases—have frustrated many. People are increasingly unwilling to wait when it comes to their health, especially for diagnostics or conditions that impact quality of life. This has driven a surge in private medical insurance uptake, not just among high earners but across a broader demographic. It’s a coping mechanism, but it also signals a growing divide in healthcare access, which could have long-term societal implications if the trend persists.
On the employer side, we’re seeing more companies offering private medical insurance and health cash plans as part of their benefits. What’s motivating this move?
Employers are recognizing that health benefits are a powerful tool for attracting and retaining talent, especially in a competitive job market. Offering private medical insurance or cash plans helps address employee wellness, which directly impacts absenteeism and productivity—key concerns for any business. When staff can access faster care, they’re back to work sooner, and it reduces the burden of prolonged illness on teams. It’s also a way to show care for employees’ well-being, boosting morale and loyalty. However, it’s not without challenges, as rising premiums can strain budgets, especially for smaller firms.
One concern raised is the rise in claims and costlier treatments due to delayed care. How is this affecting insurance premiums?
Delayed care is a real issue driving up costs for insurers. When people can’t get timely treatment through the NHS, conditions often worsen—think of a minor injury turning into a chronic issue or an undiagnosed illness progressing to a severe stage. This means claims are not only more frequent but also more expensive, as treatments become complex, requiring specialist interventions or longer hospital stays. Insurers are forced to raise premiums to cover these costs, which puts pressure on both individuals and businesses. Some are managing by shopping around for better deals or increasing deductibles, but it’s a tough balancing act between affordability and adequate coverage.
With these trends in mind, what’s your forecast for the future of IPT collections and the health insurance market in the UK?
Looking ahead, I expect IPT collections to remain strong, largely due to the sustained demand for private health insurance as NHS pressures persist. However, if economic conditions tighten further, we might see occasional dips as consumers and businesses prioritize spending. In the health insurance market, premiums will likely continue to rise unless there’s significant innovation in cost control or risk management—perhaps through technology like AI-driven assessments, which I’ve been deeply involved in. The bigger question is whether the government will adjust IPT rates in response to fiscal needs. If they resist hikes, as some suggest for the Autumn Budget, it could ease affordability concerns. But without systemic healthcare reforms, the reliance on private insurance—and the associated tax revenue—will only grow.
