As the saying goes, two things are certain in life – death and taxes. Unfortunately, “the cost of health insurance rising over time” is something else you can safely add to the list.
Though it can be frustrating, understanding the reason that these increases occur can help to take the sting out of it.
Policies increase in costs at the renewal due to the following:
Inflation
Price rises due to inflation are a hot topic in 2022. And sadly, private medical insurance is no different.
Though the rate of inflation stayed fairly constant for many years, the impact of the last few chaotic years is now making itself known in a big way.
Medical Inflation
However, medical inflation works slightly differently than regular inflation. This is standard on every policy in the UK. Medical inflation is the rising cost of medical treatment across the board. Medical Inflation runs between 6% – 12%.
Though the price increases, this is due to the constant advances in the field of medicine. New treatments and procedures can help doctors treat illnesses more easily and more effectively, but they incur a rising cost.
But there are upsides to medical inflation. Medical breakthroughs can help save more lives and provide better quality treatment.
Age Band Increases
Insurance is a risk calculation business. As people age, the risk of ill health increases. Therefore, so does the likelihood of claims costs to the insurer.
Most providers account for this by increasing the premiums of individuals as single-year age bands at the renewal each year.
The bands used depends on each insurer. Some include all the people between the ages of 40-50 in one band, whereas others will have 10 smaller bands for each year of age.
It goes without saying that this one is tricky to avoid!
Check out this article if you’re over 50 and looking at buying health insurance for the first time!
Insurance Premium Tax
On the first of November 2015, Insurance Premium Tax (IPT), increased from 6% to 9.5%. In October 2016, it increased from 9.5% to 10%, with a further increase of 2% from the 1st of June 2017.
We never quite know how stable this figure will remain. For example, at the last election, Labour was making promises to increase this to 20% if elected. This extra tax was to assist them with shoring up flood defences.
Claims
If you haven’t made any claims during the year, you might benefit from a small “No Claims Discount” when you renew your policy. Likewise, if you have made a claim, your premium might be a little higher when you renew. The policy on no claims discounts varies from insurer to insurer.
Claims performance is taken into account at a group level on company schemes. If claims performance exceeds the insurers’ target loss ratio (claims paid against premium paid, net of insurance premium tax) then an additional increase may be applied.
If you’re worried about whether health insurance companies won’t pay claims, read this!
Can we help?
Though it is completely normal (and usually unavoidable) for prices to rise a little at renewal, we know it can be alarming to see prices rise drastically.
To be honest, all the reasons listed above are out of our control. It makes us sad, but we are not miracle workers.
That being said…
If we believe that your increase is unfair, we will do our best to help negotiate with the insurance company on your behalf. As brokers, we have a little more leverage than the average consumer so we are more likely to be able to help than if you go to the insurers directly.
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