Private Medical Insurance - UK

Prior to 2006, the individual PMI market had been reliant on the corporate sector to make up for a steady decline in sales. Since 2006, the individual sector has shown signs of recovery, although there is still work to be done to rejuvenate the market. Maintaining affordable premiums and product innovation are key in this respect, with providers like PruHealth making significant progress here. On the other hand, the corporate sector has seen sustained growth for a number of years, largely due to the benefits for both the employee and employer in offering health at work initiatives.

A lack of public faith in the NHS is one of the key driving forces behind consumer uptake in recent years, although significant investment in public healthcare is slowly improving things. However, the challenge still remains convincing people that the benefits of PMI are worth paying for when a free alternative exists, with many are reluctant to do so. Providers have focused on shorter waiting times, access to consultants and treatments and drugs that are not available on the NHS. Budget policies aimed at individuals and the use of no claims discounts and other incentives may also have helped, whilst in the corporate sector, modular policies aimed at SMEs have become quite popular. One of the biggest challenges, however, remains how to deal with the spiralling cost of medical inflation, whilst still attracting virgin business to the market.

This report covers the dynamics of the PMI market, looking at the market forces that are driving the sector and the competing products that are available to consumers. The report looks at the overall size of the market and how it has grown in recent years, alongside the market shares of individual providers and examples of the new innovations they have introduced. This report also contains a section that examines the main brands in the market in detail, before concluding with an analysis of the consumer research commissioned exclusively by Mintel for this report.

Key report themes:

• The steady decline of the individual PMI sector up until 2006.
• The continuing battle against a ‘free’ state-funded healthcare system.
• The spiralling cost of medical inflation and increasing cost of claims for providers, combined with the pressure to keep premiums down.
• The downturn in the current economic climate is likely to impact sales.
• Cheaper alternatives available to individuals and companies, such as health cash plans and healthcare trust schemes.
• A lack of intermediary involvement in the individual PMI market.

Issues in the Market

Key issues

Abbreviations

Market in Brief

The PMI market has picked up since 2006…

Figure 1: Gross earned premiums (GEPs) for PMI, by sector, 2002-07

…with Bupa dominating, and smaller providers suffering

Figure 2: PMI provider rankings, by subscription income, 2005-07

Worries about the NHS continue to drive the market…

…but pricing pressure remains

Two main competing products

The corporate sector is heavily intermediated

Figure 3: Proportional distribution of PMI sales, by channel, 2005-07

Almost a fifth of consumers have PMI

Figure 4: Ownership of PMI and other related healthcare/protection products, June 2008

Internal Market Environment

Key points

The role of the NHS…indirectly promoting PMI

Figure 5: Top ten reasons given by PMI holders for taking out cover, 2007

Public spending on the NHS has increased significantly…

Figure 6: Total public spending on the NHS, 2002/03-2010/11

…with waiting times having come down as a result

Figure 7: Inpatient and outpatient waiting times (England), 2005-08

NHS health screening plans may also benefit the PMI industry…

…as might the government’s plans for polyclinics

The amount paid out on PMI claims has increased…

Figure 8: Claim amounts incurred and claims as a proportion of gross earned premiums (GEPs), 2002-07

…whilst premiums have only modestly increased

Figure 9: Average PMI premiums, by sector, 2002-07

External Market Environment

Key points

Greater personal wealth makes individual PMI more affordable…

Figure 10: Total personal disposable income (PDI) and consumer expenditure, 2003-12

…but tighter economic conditions may force people to cut back

Higher profits make corporate PMI more affordable

Figure 11: Gross operating surplus and balance of net primary incomes of private non-financial corporations, 2000-06

PMI is a highly prized employee benefit…

Figure 12: Top ten company benefits received and most highly valued by employees, February 2008

…and is the most common health benefit offered by employers

Don’t forget the smaller businesses…there’s a lot out there

Figure 13: Number of private sector enterprises, employees and turnover - UK, start 2006

Cancer incidence has increased…

Figure 14: Age-standardised cancer incidence and mortality rates, all cancers (excluding non-melanoma skin cancer), Great Britain, 1975-2005

…whilst smoking prevalence has declined

Figure 15: Prevalence of cigarette smoking, by gender, 1974-2006

Obesity is on the rise…

Figure 16: Number of obese men and women - England, 2003 and 2010

…whilst alcohol consumption has fallen

Figure 17: Weekly alcohol consumption level: percentage of people exceeding specified amounts, by age and gender, 1988-2006

Competitive Context

Key points

There are a range of healthcare funding options available

Figure 18: The main methods of obtaining healthcare treatment in the UK, 2007

Healthcare trust schemes have grown in popularity…

Figure 19: Number of subscribers and people covered by healthcare trust schemes, 2002-07

…although healthcare cash plans are more of a threat

Figure 20: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2002-06

Strengths and Weaknesses in the Market

Strengths

Lack of public faith in the NHS

Innovation in the market attracting younger customers

More affordable with modest increases in premiums

Strong and established brands

Weaknesses

NHS improvements in waiting lists and treatments available

Economic concerns curtail both consumer and business spending

Lack of adviser interest in the personal sector

Tax disincentives for both companies and individuals

Market Size and Forecast

Key points

PMI is the most commonly held type of health insurance

Figure 21: Ownership of PMI and other related health/protection products, June 2008

The PMI market has picked up since 2005

Figure 22: Number of subscribers and people covered by PMI, by sector, 2002-07

Gross earned premiums have also steadily increased

Figure 23: Gross earned premiums (GEPs) for PMI, by sector, 2002-07

Growth in virgin business remains crucial

Market forecast

The harmony of personal and public provision?

Long-term growth is expected in the personal sector…

Figure 24: Forecast for the personal PMI market, 2003-13

…with slightly lower growth anticipated in the corporate sector

Figure 25: Forecast for the corporate PMI market, 2003-13

Average premiums are expected to decline in the personal sector

Figure 26: Average annual premiums for PMI, Index, 2003-13

Factors used in the forecast

Personal market

Corporate market

Market Share

Key points

Bupa retains its very comfortable number one spot…

Figure 27: PMI provider rankings, by subscription income, 2005-07

…whilst smaller providers are quickly loosing ground

Figure 28: Illustration of PMI providers’ market shares, 2006 and 2007

A number of third-party administrators

Companies and Products

Two key types of underwriting…

…and the matter of price versus policy coverage

Bupa

AXA PPP healthcare

Norwich Union Healthcare

Standard Life Healthcare

CIGNA HealthCare

WPA

Simplyhealth Group

PruHealth

Brand Communication and Promotion

Key points

PMI accounts for a small proportion of financial services adspend…

Figure 29: Top ten categories of financial services advertising expenditure (sorted on 2007 data), 2004-07

…but it is the third-biggest category within general insurance

Figure 30: Top ten categories of general insurance advertising expenditure (sorted on 2007 data), 2004-07

PruHealth has launched an aggressive advertising campaign

Figure 31: Top 20 PMI advertisres, by expenditure (sorted on 2007 data), 2004-07

TV and direct mail are the most popular forms of PMI advertising

Figure 32: PMI advertising expenditure, by media type, 2004-07

Channels to Market

Key points

Sales of corporate PMI are heavily intermediated

Figure 43: Proportional distribution of PMI sales, by channel, 2005-07

The growing role of the internet…

…and of course, the retailers

The Consumer: Product Ownership and Attitudes towards Healthcare

Key points

Almost two in ten consumers are covered by PMI

Figure 44: Ownership of PMI and other related healthcare/protection products, June 2008

Over half of PMI holders are covered by their employer

Figure 45: Ownership of PMI, by type of policy, June 2008

PMI is the domain of the middle age groups…

Figure 46: Ownership of PMI and other related health/protection products, by gender, age, socio-economic group, lifestage, newspaper readership and gross annual household income, June 2008

…and also of the more affluent

Superbugs are a major cause of concern…

Figure 47: Attitudes towards public and private healthcare, June 2008

…yet many are reluctant to pay for healthcare

Intermediaries have a role to play

Policy exclusions and medical disclosure are off-putting

Older consumers are most concerned about superbugs

Figure 48: Agreement with selected statements regarding public and private healthcare, by gender, age, socio-economic group, marital status and gross annual household income, June 2008

Wealthy consumers are more open to private healthcare…

Figure 49: Positive sentiment towards private healthcare, by socio-economic group, June 2008

…with DEs and young adults being the most apathetic

Married couples are also worth targeting

Healthcare protection product owners have greater NHS concerns

Figure 50: Attitudes towards healthcare, by ownership of health-related protection products, June 2008

Paid-for in taxes NHS treatment remains a barrier to some

The Consumer: Further Analysis

Key points:

Consumer mindset groups identified

Potential PMI Targets

And/or, respondents that have any of the following opinions about private healthcare:

Happy Policyholders

PMI Rejecters

PMI Sceptics

NHS Critics

Happy Policyholders are likely to be high-income ABs

Figure 57: Profiles of various consumer mindset groups, by gender, age, socio-economic group, gross annual household income, household tenure, TV region, and age/socio-economic group, June 2008

Young Potential PMI Targets look for wider coverage…

Figure 58: Key reasons for choosing PMI among potential PMI targets, by gender, age, socio-economic group, marital status and lifestage, June 2008

…as do price-insensitive ABs…

…whilst third agers want cover for pre-existing conditions

How much do NHS concerns influence PMI uptake?

Figure 59: NHS concerns, by consumer mindset groups, June 2008

PMI holders tend to be more concerned with the NHS

Figure 60: PMI/cash plan ownership, by levels of concern in the NHS, June 2008

CHAID analysis

What is CHAID analysis?

CHAID analysis confirms ABs are the key target group for PMI

Figure 61: CHAID analysis on the PMI market, June 2008

Appendix - The Consumer: Product Ownership and Attitudes towards Healthcare

Figure 62: Ownership of PMI and other related healthcare/protection products, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008

Figure 63: Attitudes towards public and private healthcare, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 1 of 2)

Figure 64: Attitudes towards public and private healthcare, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 2 of 2)

Appendix - The Consumer: Further Analysis

Figure 69: Profiles of various consumer mindset groups, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008

Figure 70: Appealing characteristics of PMI for Potential PMI Targets, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 1 of 2)

Figure 71: Appealing characteristics of PMI for Potential PMI Targets, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 2 of 2)