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Health Cash Plans and Private Medical Insurance - UK - August 2009

  • In spite of the economic downturn, the total number of PMI subscribers increased by 4% in 2008, with the corporate sector rising by 6% rise and the personal sector remaining flat.
  • Contribution income from health cash plans increased by 4% in 2008, although the number of subscribers fell by 2% from 2.99 million to 2.94 million.
  • 2009 is likely to be a much more challenging year, however, particularly in the corporate PMI sector due to business collapses and budgetary cutbacks.
  • Unlike health cash plans, The PMI market is heavily intermediated. However, intermediary interest in the health cash plan market is picking up – in 2002, just 3% of sales were intermediated, compared to 17% in 2008.
  • Mintel’s consumer research shows that 19% of people in the UK are covered by PMI (around 9.3 million people) and 6% have a health cash plan (around 2.9 million people).
  • Retention in the personal sector may not be too bad this year as policyholders really value their cover – 44% of people with individual PMI said if things got tight they’d do whatever they could to make savings elsewhere before cutting health insurance.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Definitions – the difference between PMI and health cash plans
          • Abbreviations
          • Future Opportunities

            • Combined PMI/HCP policies
              • The concept of blending
                • Increasing choice and flexibility in HCPs
                  • It’s all about customisation
                  • Market in Brief

                    • The corporate PMI sector is likely to suffer most in 2009…
                      • Figure 1: Gross earned premiums (GEP) for PMI, by sector, 2002-09
                    • ...with the HCP market also seeing a fall in sales
                      • Figure 2: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2003-09
                    • NHS concerns influence the PMI market
                      • The NHS is the main competitor against PMI
                        • Bupa is the leading PMI provider…
                          • Figure 3: Subscription income of the top ten PMI providers, 2005-08
                        • …while Simplyhealth dominates the HCP market
                          • Figure 4: HCP provider market shares, by contribution income, 2008
                        • The PMI market is more intermediated than that of HCPs
                          • One in five people own a healthcare cover product
                            • Figure 5: Ownership of healthcare products, by gender, age and socio-economic group, April 2009
                          • PMI and HCP holders are reluctant to cancel their cover
                          • Internal Market Environment

                            • Key points
                              • Infection fears at NHS hospitals boost demand for PMI
                                • Figure 6: Top ten reasons for taking out PMI, 2008
                              • A shortage of investment may also be an issue
                                • Figure 7: Total public spending on the NHS, 2003/04-2010/11
                              • Access to cancer drugs may tempt some people to go private
                                • The NHS has slashed waiting times
                                  • Figure 8: Inpatient and outpatient waiting times (England), 2005-09
                                • A new approach for the NHS
                                  • Consumers are still confused about PMI
                                    • The impact of swine flu
                                      • Growth in sales outpacing growth in claim costs
                                        • Figure 9: Value of total PMI claims, and as a proportion of gross earned premiums (GEP), 2002-08
                                      • Providers trying to retain their corporate customers
                                        • Figure 10: Average PMI premiums, by sector, 2002-08
                                    • Broader Market Environment

                                      • Key points
                                        • Reduced consumer expenditure presents a challenge…
                                          • Figure 11: PDI and consumer expenditure, 2004-14
                                        • …but over the longer term affluence is increasing
                                          • Figure 12: Size of the AB population and the proportion of ABs out of the total population, 2004-14
                                        • PMI is a popular benefit to offer…
                                          • Figure 13: Proportion of employers offering particular benefits as core*, top 15 benefits, January 2009
                                        • …and is highly valued by employees
                                          • Figure 14: Top ten benefits most highly valued by employees*, February 2008
                                        • Don’t forget small businesses – there’s a lot out there
                                          • Figure 15: Number of private sector enterprises, employees and turnover – UK, start 2007
                                        • The rising number of cancer cases benefits PMI providers
                                          • Unhealthy lifestyles may also impact the market
                                          • Competitive Context

                                            • Key points
                                              • A variety of options exist in healthcare options
                                                • Figure 16: The main methods of obtaining healthcare treatment in the UK, 2009
                                              • Self-insurance is an option for large companies
                                                • Figure 17: Number of subscribers and people covered by healthcare trust schemes, 2003-08
                                              • Personal savings and self-pay are also an option
                                              • SWOT Analysis

                                                  • Figure 18: Healthcare cover market SWOT analysis, 2009
                                              • Who’s Innovating?

                                                • Key points
                                                  • The potential for hybrid products
                                                    • Aviva launches a health incentive scheme
                                                      • It’s all about tailored cover and modular policies
                                                        • Unlimited cover from Exeter Friendly
                                                          • AIG launches a new type of PMI product
                                                            • Helping people through the recession
                                                              • Medical Care Direct targeting the self-pay market
                                                              • Trade Perspective

                                                                • Value for money is key to policyholders at the moment
                                                                  • Retention is tough in the corporate sector
                                                                    • Combating the recession
                                                                      • Innovation in the market
                                                                        • Health cash plans versus PMI
                                                                          • The impact of the NHS on PMI uptake
                                                                            • Driving growth in the market
                                                                            • Market Size and Forecast

                                                                              • Key points
                                                                                • The total number of PMI subscribers increased by 4% in 2008…
                                                                                  • Figure 19: Number of subscribers and people covered by PMI, by sector, 2002-09
                                                                                • …and many think the industry will hold up relatively well this year
                                                                                  • The corporate sector is expected to suffer the brunt of any fall
                                                                                    • Figure 20: Gross earned premiums (GEP) for PMI, by sector, 2002-09
                                                                                  • Demand for health cash plans fell slightly in 2008…
                                                                                    • Figure 21: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2003-09
                                                                                  • …although contribution income held up relatively well
                                                                                    • Market forecast
                                                                                      • The number of people covered by PMI will fall this year…
                                                                                        • Figure 22: Number of subscribers and people covered by PMI, by sector, 2002-14
                                                                                      • …but the market should pick up in 2010
                                                                                        • Figure 23: Gross earned premiums (GEP) for PMI, by sector, 2002-14
                                                                                      • Low growth expected in the health cash plan market
                                                                                        • Figure 24: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2003-14
                                                                                    • Market Share

                                                                                      • Key points
                                                                                        • Bupa is the market leader by some way
                                                                                          • Figure 25: Subscription income of the top ten PMI providers, 2005-08
                                                                                        • The top four providers account for 85% of the market
                                                                                          • Figure 26: PMI provider market shares, by subscription income, 2008
                                                                                        • Simplyhealth dominates the health cash plan market…
                                                                                          • Figure 27: Contribution income of the main HCP providers, 2005-08
                                                                                      • Companies and Products

                                                                                        • Company profiles
                                                                                          • Aviva (formerly Norwich Union Healthcare)
                                                                                            • AXA PPP healthcare
                                                                                              • Bupa
                                                                                                • Standard Life Healthcare
                                                                                                  • Simplyhealth
                                                                                                    • Westfield Health
                                                                                                    • Brand Communication and Promotion

                                                                                                      • Key points
                                                                                                        • PMI adspend fell by 13% in 2008
                                                                                                          • Figure 28: Top ten categories of general insurance advertising, by expenditure, 2006-08
                                                                                                        • Bupa is the biggest advertiser of PMI
                                                                                                          • Figure 29: Top 15 PMI advertisers, by expenditure, 2006-08
                                                                                                        • TV adspend fell significantly last year
                                                                                                          • Figure 30: PMI advertising expenditure, by media type, 2006-08
                                                                                                      • Brand Elements

                                                                                                        • Key points
                                                                                                          • Brand map
                                                                                                              • Figure 31: Attitudes towards and usage of healthcare cash plan and PMI brands, February 2009
                                                                                                            • Brand qualities of healthcare cash plan and PMI brands
                                                                                                              • Bupa has strongest image
                                                                                                                • Figure 32: Personalities of various healthcare cash plan and PMI brands, February 2009
                                                                                                              • Experience of healthcare cash plan and PMI brands
                                                                                                                • Usage low, but Bupa most popular – while Boots lacks awareness
                                                                                                                  • Figure 33: Consumer usage of various healthcare cash plan and PMI brands, February 2009
                                                                                                                • Brand intentions for healthcare cash plan and PMI brands
                                                                                                                  • BUPA most considered, but one in five unfussy on health cover
                                                                                                                    • Figure 34: Consideration of various healthcare cash plan and PMI brands, February 2009
                                                                                                                  • Brand satisfaction for healthcare cash plan and PMI brands
                                                                                                                    • Bupa most satisfying, others lack standout
                                                                                                                      • Figure 35: Satisfaction with various healthcare cash plan and PMI brands, February 2009
                                                                                                                    • Brand commitment to healthcare cash plan and PMI brands
                                                                                                                      • Bupa has most loyal customers, AXA PPP alienating?
                                                                                                                        • Figure 36: Commitment to various healthcare cash plan and PMI brands, February 2009
                                                                                                                      • Bupa
                                                                                                                        • What the consumer thinks
                                                                                                                          • Figure 37: Attitudes towards the Bupa brand, February 2009
                                                                                                                        • Standard Life Healthcare
                                                                                                                          • What the consumer thinks
                                                                                                                            • Figure 38: Attitudes towards the Standard Life Healthcare brand, February 2009
                                                                                                                          • Norwich Union/Aviva
                                                                                                                            • What the consumer thinks
                                                                                                                              • Figure 39: Attitudes towards the Norwich Union/Aviva brand, February 2009
                                                                                                                            • AXA PPP healthcare
                                                                                                                              • What the consumer thinks
                                                                                                                                • Figure 40: Attitudes towards the AXA PPP healthcare brand, February 2009
                                                                                                                            • Channels to Market

                                                                                                                              • Key points
                                                                                                                                • The corporate PMI sector is heavily intermediated…
                                                                                                                                  • Figure 41: Proportional distribution of PMI sales, by channel, 2005-08
                                                                                                                                • …whereas in the personal sector, direct sales dominate
                                                                                                                                  • Most HCPs are sold direct, but intermediation could grow
                                                                                                                                    • Figure 42: Sales of HCPs, by distribution channel, 2008
                                                                                                                                • The Consumer – Product Ownership

                                                                                                                                  • Key points
                                                                                                                                    • Ownership of healthcare cover increased slightly in 2008
                                                                                                                                      • Figure 43: Healthcare cover ownership, 2004-08
                                                                                                                                    • PMI makes up the majority of the healthcare cover market…
                                                                                                                                      • Figure 44: Types of healthcare cover owned, 2008
                                                                                                                                    • …with two thirds of owners having cover for all conditions
                                                                                                                                      • Figure 45: Conditions/treatments included in healthcare cover, 2008
                                                                                                                                    • Most people with healthcare cover arrange it independently
                                                                                                                                      • Figure 46: Healthcare cover ownership, by method of arrangement (ie who pays for the insurance), 2008
                                                                                                                                    • ABs are a lot more likely to have healthcare cover…
                                                                                                                                      • Figure 47: Healthcare cover ownership, by demographics, 2008
                                                                                                                                    • …especially where PMI is concerned, though less so for HCPs
                                                                                                                                      • Figure 48: Ownership of healthcare products, by demographics, April 2009
                                                                                                                                    • Unlike PMI, cash plans are popular amongst older people
                                                                                                                                    • The Consumer – The Impact of the Recession on Healthcare Cover

                                                                                                                                      • Key points
                                                                                                                                        • The recession is a threat to health cover providers…
                                                                                                                                          • Figure 49: Attitudes towards healthcare cover in light of the recession, April 2009
                                                                                                                                        • …but not everyone is suffering
                                                                                                                                          • 35-44-year-olds are most likely to cancel health cover in bad times
                                                                                                                                            • Figure 50: Attitudes towards healthcare cover in light of the recession, by demographics, April 2009
                                                                                                                                          • High earners are clearly the best target
                                                                                                                                            • Larger households may be a better target
                                                                                                                                              • Independent PMI and HCP owners really value their policy…
                                                                                                                                                • Figure 51: Ownership of healthcare products, by attitudes towards healthcare cover in light of the recession, April 2009
                                                                                                                                              • …and are reluctant to cut their cover
                                                                                                                                              • The Consumer – Health Cash Plan Benefits

                                                                                                                                                • Key points
                                                                                                                                                  • Dental cover is the most desirable benefit of HCPs
                                                                                                                                                    • Figure 52: Benefits most desired in health cash plans, April 2009
                                                                                                                                                  • Women value health screening and maternity benefits
                                                                                                                                                    • Figure 53: Benefits most desired in health cash plans, by demographics, April 2009
                                                                                                                                                    • Figure 54: Benefits most desired in health cash plans, by demographics, April 2009 (continued)
                                                                                                                                                  • For young people, information and accessibility are important
                                                                                                                                                    • ABs are more appreciative of the benefits offered by HCPs
                                                                                                                                                      • Health cash plan owners really value their benefits
                                                                                                                                                        • Figure 55: Ownership of healthcare products, by benefits most desired in health cash plans, April 2009
                                                                                                                                                      • PMI holders are still worth targeting
                                                                                                                                                      • The Consumer – Attitudes towards Healthcare

                                                                                                                                                        • Key points
                                                                                                                                                          • Two fifths of people think NHS waiting lists are too long
                                                                                                                                                            • Figure 56: Attitudes towards health and healthcare, April 2009
                                                                                                                                                          • Men are more sceptical of health insurers
                                                                                                                                                            • Figure 57: Attitudes towards health and healthcare, by demographics, April 2009
                                                                                                                                                          • DEs just aren’t interested
                                                                                                                                                            • Married people may not be the best target
                                                                                                                                                              • Concerns over the standard of NHS care are key in PMI uptake
                                                                                                                                                                • Figure 58: Attitudes towards health and healthcare, by ownership of healthcare products, April 2009
                                                                                                                                                              • A focus on prevention is also important
                                                                                                                                                              • The Consumer – Attitudinal Groups

                                                                                                                                                                • Key points
                                                                                                                                                                  • Attitudinal groups identified
                                                                                                                                                                    • PMI user-supporters are most likely to own PMI…
                                                                                                                                                                      • Figure 59: Ownership of healthcare cover products, by attitudinal groups, April 2009
                                                                                                                                                                    • Apathetics just aren’t interested in healthcare cover
                                                                                                                                                                      • Figure 60: Attitudes towards health cover in light of the downturn, by attitudinal groups, April 2009
                                                                                                                                                                    • PMI user-supporters have been less affected by the recession
                                                                                                                                                                      • PMI sceptics like the benefits offered by HCPs
                                                                                                                                                                        • Figure 61: Benefits most desired in health casgh plans, by attitudinal groups, April 2009
                                                                                                                                                                      • PMI sceptics don’t trust health insurance companies
                                                                                                                                                                        • Figure 62: Attitudes towards healthcare, by attitudinal groups, April 2009
                                                                                                                                                                      • Half of NHS haters have had a bad experience with the NHS
                                                                                                                                                                        • Younger people are more likely to be PMI user-supporters…
                                                                                                                                                                          • Figure 63: Attitudinal groups, by demographics, April 2009
                                                                                                                                                                        • …with DEs likely to fall into the Apathetic group
                                                                                                                                                                        • Appendix – Product Ownership

                                                                                                                                                                            • Figure 64: Ownership of healthcare products, April 2009
                                                                                                                                                                            • Figure 65: Healthcare cover ownership, by demographics, 2008
                                                                                                                                                                            • Figure 66: Ownership of healthcare products, by demographics, April 2009
                                                                                                                                                                        • Appendix – Health Cash Plan Benefits

                                                                                                                                                                            • Figure 68: Benefits most desired in health cash plans, by demographics, April 2009 (Table 1 of 2)
                                                                                                                                                                            • Figure 69: Benefits most desired in health cash plans, by demographics, April 2009 (Table 2 of 2)
                                                                                                                                                                        • Appendix – The Consumer – Attitudes towards Healthcare

                                                                                                                                                                            • Figure 67: Attitudes towards healthcare cover in light of the economic downturn, by demographics, April 2009
                                                                                                                                                                            • Figure 70: Attitudes towards health and healthcare, by demographics, April 2009 (Table 1 of 2)
                                                                                                                                                                            • Figure 71: Attitudes towards health and healthcare, by demographics, April 2009 (Table 2 of 2)

                                                                                                                                                                        Health Cash Plans and Private Medical Insurance - UK - August 2009

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