Dear Intermediary Partner
We’re writing to let you know about a change in Insurance Premium Tax (IPT) and how it affects your customers. As you may know, in its 2016 Summer Budget, the Government announced it was increasing Insurance Premium Tax from 9.5% to 10%.
What does this mean for my customers?
New or existing contracts starting up to and including 30 September 2016
Regardless of payment frequency (e.g. monthly/annually), customers who are mid-contract but making payments on or after 1 October 2016 will continue to pay premiums with the current IPT rate of 9.5% for the duration of their contract. This means if a customer’s 12 month contract began on 1 January 2016, and they pay monthly, all 12 of their monthly premiums will attract an IPT rate of 9.5%.
Renewing contracts starting between 1 October 2016 and 31 October 2016
A previous IPT increase took place on 1 November 2015, where the rate of IPT increased from 6% to 9.5%. Bupa chose to implement this increase at member’s renewal. This means the IPT rate for renewals taking place in October will increase from 6% to 10%, as these members will not have renewed since the previous increase took place.
New contracts starting on or after 1 October 2016 and renewing contracts starting on or after 1 November 2016
New or renewing contracts starting on or after 1 October 2016 will attract IPT at the new rate of 10%. Unfortunately, customers cannot mitigate the increase by pre-paying for new contracts that start on or after 1 October 2016.
How does this affect new business quotes?
All new quotes remain valid for 14 days, provided that the start date of the contract remains the same. This means that a quote generated between 17-30 September and accepted within 14 days will attract an IPT rate of 9.5%, as long as the start date of the contract is before 1 October. If a customer chooses a start date on or after 1 October, a new quote will need to be generated and this will attract an IPT rate of 10%.
What about mid contract adjustments?
- Changes made on or after 1 February 2017 that cause an increase in net premium will attract the new IPT rate of 10% on the adjusted premium.
- For new or existing contracts beginning up to and including 30 September 2016: any change made up to and including 31 January 2017 that causes an increase in net premium will attract the IPT rate of 9.5%.
- For new or renewing contracts beginning on or after 1 October 2016: any mid-contract changes that cause an increase in net premium will attract the IPT rate of 10%.
Any refund of premium as a result of mid-contract adjustments will include the IPT originally charged.
How will Bupa explain this to customers?
All direct pay customers will receive a leaflet to explain the IPT rise as part of their renewal packs. We won’t be communicating before they receive their renewal packs.
You don’t need to do anything. We’ll make all the necessary changes to customers’ premiums. If you have any questions, please call 0800 33 2000* and select option 2.
Yours Sincerely,
Richard Norris,
Consumer Sales Director, UK
