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Private Medical Insurance and Health Cash Plans - UK - August 2011

This report provides a detailed analysis of the Private Medical Insurance Market (PMI) and the Health Cash Plan Market (HCP), and gives an overview into the current market conditions. There is a full breakdown of the market size in terms of value and volume, with a forecast included showing the expected growth during the next five years. Recent innovations and distributions are also analysed. The final sections of the report examines consumers’ views on private health cover, including ownership levels and attitudes towards the NHS and private healthcare.

Following the recession, both the private medical insurance (PMI) and health cash plan (HCP) markets have endured a difficult period. The repercussions were still present in 2010. In the private medical insurance market, the number of subscribers dropped by 1.14%, while the number of HCP contributors fell by almost 3%. Economic challenges have made it difficult to sell private health insurance to consumers, as confidence has been shaken by high unemployment and inflation. As the economic recovery has stuttered in 2011, neither the PMI nor HCP market will recover fully in 2011, and insurers’ focus has remained on consumer retention.

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Market size and forecast
                • Figure 1: Forecast for total PMI gross earned premiums (GEP), 2006-16
                • Figure 2: Forecast for HCP contribution income earned, 2006-16
              • Channels to market
                • Market factors
                  • NHS spending under pressure as government tackles budget deficit
                    • Stuttering economic recovery remains a challenge
                      • Complaints to the FOS about PMI fell in 2010/11
                        • Government rules out tax break on PMI
                          • Claims as a percentage of premiums have fallen
                            • Companies, brands and innovation
                              • The top five providers sold 91% of new PMI policies in 2010
                                • Figure 3: PMI provider market shares, by income, 2010
                              • Simplyhealth dominates the HCP sector with 45% market share
                                • Figure 4: HCP provider market shares, by income, 2010
                              • Brand promotion
                                • Who’s innovating
                                  • The consumer
                                    • Product ownership levels
                                      • Figure 5: Health insurance ownership, June 2011
                                    • Consumers and the NHS
                                      • Figure 6: Agreement with the statement ‘On the whole, the NHS does a really good job’, June 2011
                                    • Attitudes towards health and private care
                                      • Figure 7: Attitudes towards health and healthcare, June 2011
                                    • What we think
                                    • Issues in the Market

                                        • What does NHS uncertainty mean for the PMI market?
                                          • How are insurers tackling rising claims?
                                            • Can providers improve their image and gain consumer trust?
                                              • Are distribution channels changing in the health insurance sector?
                                                • How can PMI and HCP providers increase ownership levels?
                                                • Future Opportunities

                                                  • Building a moral brand
                                                    • Private health insurance as part of a ‘daily’ routine
                                                    • Internal Market Environment

                                                      • Key points
                                                        • NHS spending increased by 1% between 2009/10 and 2010/11
                                                          • Figure 8: Total public spending on the NHS, 2003/04-2014/15
                                                        • PMI claims costs as a percentage of GEPs fell in 2010
                                                          • Figure 9: Value of total PMI claims and as a proportion of GEP, 2002-10
                                                        • Average PMI premiums increase in personal and corporate sectors
                                                          • Figure 10: Average PMI premiums, by corporate and personal sectors, 2002-10
                                                        • PMI providers have been trying to manage claim costs
                                                          • HCP claims drop in 2010
                                                            • Figure 11: Amount of HCP cash benefits paid and benefits paid as a percentage of contribution income earned, 2002-10
                                                        • Broader Market Environment

                                                          • Key points
                                                            • Difficult economic climate has increased consumer caution
                                                              • Figure 12: GDP quarterly percentage change, Q1 2008-Q2 2011
                                                            • A drop in the number of employers offering PMI as a core benefit
                                                              • Figure 13: Proportion on employers offering particular benefits as core, May 2011
                                                            • Tax relief on PMI rejected by the government
                                                              • Growing number of ABs could help grow policy sales
                                                                • Figure 14: Forecast adult population trends, by socio-economic group, 2006-16
                                                              • Complaints about PMI drop by 22 percentage points
                                                              • Competitive Context

                                                                • Key points
                                                                  • The majority of adults are supportive of the NHS
                                                                    • Uncertainty about NHS could increase appeal of private care
                                                                      • Access to private care likely to increase under Government plans
                                                                        • NHS will have to fund care abroad
                                                                          • Self-insured medical schemes increased in 2010
                                                                            • Figure 15: Number of subscribers and people covered by healthcare trust schemes, 2002-10
                                                                          • 15% of consumers have money set aside for medical/dental treatment
                                                                          • SWOT Analysis

                                                                              • Figure 16: SWOT analysis of the health insurance market, 2011
                                                                          • Who’s Innovating?

                                                                            • Key points
                                                                              • Perfect Cash Plan includes income protection
                                                                                • Affordable cash plans for businesses
                                                                                  • App availability and usage likely to increase
                                                                                    • Private medical insurance for expats
                                                                                      • Commission models designed to tackle churn in SME healthcare market
                                                                                        • Bupa announces a reversal on cancer limits for corporate policies
                                                                                        • Market Size and Forecast

                                                                                          • Key points
                                                                                            • Tough market conditions lead to a further contraction in PMI subscribers…
                                                                                              • Figure 17: Number of subscribers and people covered by PMI, by sector, 2003-11
                                                                                            • …while corporate and personal PMI premiums increased in 2010
                                                                                              • Figure 18: Gross earned premiums (GEP) for PMI, by sector, 2002-11
                                                                                            • HCP market declines further during 2010
                                                                                              • Figure 19: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2006-11
                                                                                            • Uncertain economic recovery has made in challenging to sell PMI and HCPs in 2011
                                                                                              • Market forecast
                                                                                                • Figure 20: Forecast for total PMI gross earned premiums (GEP), 2006-16
                                                                                                • Figure 21: Forecast for HCP contribution income earned, 2006-16
                                                                                              • Forecast methodology
                                                                                              • Market Share

                                                                                                • Key points
                                                                                                  • Bupa remains the number one PMI provider…
                                                                                                    • Figure 22: PMI provider market shares, by income, 2010
                                                                                                    • Figure 23: Subscription income of the top ten PMI providers, 2006-10
                                                                                                  • …while Simplyhealth is the number one provider of HCPs
                                                                                                    • Figure 24: HCP market share. by income, 2006-10
                                                                                                • Companies and Products

                                                                                                  • Aviva
                                                                                                      • Figure 25: Financial performance of Aviva Plc (Health insurance business), 2009 and 2010
                                                                                                    • AXA PPP healthcare
                                                                                                      • Bupa
                                                                                                        • PruHealth
                                                                                                          • Simplyhealth
                                                                                                              • Figure 26: Financial performance of Simplyhealth Group, 2009 and 2010
                                                                                                          • Brand Communication and Promotion

                                                                                                            • Key points
                                                                                                              • PMI adspend relatively stable despite tough market conditions
                                                                                                                • Figure 27: Private medical insurance adspend, 2008/09- 2010/11*
                                                                                                              • NHS uncertainty could present an opportunity for advertisers
                                                                                                                • Bupa remains the number one advertiser of PMI
                                                                                                                  • Figure 28: Top 20 advertisers of PMI, by expenditure, 2008/09-2010/11
                                                                                                                • Direct mail accounts for more than 50% of PMI adspend
                                                                                                                  • Figure 29: Private medical insurance adspend, by media type, 2008/09-2010/11
                                                                                                              • Channels to Market

                                                                                                                • Key points
                                                                                                                  • Intermediated distribution dominates the corporate market…
                                                                                                                    • Figure 30: Proportional distribution of PMI sales, by sales channel, 2006-10
                                                                                                                  • …while direct channels account for two thirds of personal PMI
                                                                                                                    • Internet is a good source of information but sales are relatively small
                                                                                                                      • HCPs are predominantly sold through direct channels
                                                                                                                        • Figure 31: Proportional distribution of HCP sales, by sales channel, 2008-10
                                                                                                                    • Product Ownership Levels

                                                                                                                      • Key points
                                                                                                                        • Around 27% of the UK population have some form of health insurance
                                                                                                                          • Figure 32: Health insurance ownership, June 2011
                                                                                                                        • PMI ownership is higher among men, while HCP levels are even
                                                                                                                          • Self-insurance is most popular among the over-65s…
                                                                                                                            • Figure 33: Health insurance ownership, by gender and age, June 2011
                                                                                                                          • …while health insurance ownership is highest among 45-54-year-olds
                                                                                                                            • Figure 34: PMI and health cash plan ownership, by age, June 2011
                                                                                                                          • Health insurance ownership increases with affluence
                                                                                                                            • Figure 35: Health insurance ownership, by socio-economic group and household income, June 2011
                                                                                                                          • Some multiple product ownership exists in the market
                                                                                                                            • Figure 36: Cross-analysis of health insurance product ownership, June 2011
                                                                                                                        • Consumers and the NHS

                                                                                                                          • Key points
                                                                                                                            • The majority of people feel that the NHS does a really good job
                                                                                                                              • Figure 37: Agreement with the statement ‘On the whole, the NHS does a really good job’, June 2011
                                                                                                                            • Elderly are the most supportive about NHS services
                                                                                                                              • Figure 38: Agreement with the statement ‘On the whole, the NHS does a really good job’, by gender, age and lifestage, June 2011
                                                                                                                            • Consumer support for the NHS and health insurance ownership are not mutually exclusive
                                                                                                                              • Over 50% of adults feel that NHS services will suffer
                                                                                                                                • Figure 39: Agreement with the statement ‘I think that the proposed reforms to the NHS will reduce the standard of care available’, June 2011
                                                                                                                              • Agreement is skewed towards 45-54-year-olds
                                                                                                                              • Attitudes Towards Health and Private Care

                                                                                                                                • Key points
                                                                                                                                  • Over 50% of adults are unaware about health insurance costs
                                                                                                                                    • Figure 40: Attitudes towards health and healthcare, June 2011
                                                                                                                                  • Awareness and engagement lacking even among those with insurance
                                                                                                                                    • Figure 41: Cross-analysis of health insurance ownership and attitudes towards health and healthcare, June 2011
                                                                                                                                  • Higher earners are more critical of NHS waiting lists
                                                                                                                                    • Figure 42: Attitudes towards health and private care, by annual household income, June 2011
                                                                                                                                  • A fifth of consumers do not trust providers to treat customers fairly
                                                                                                                                    • Figure 43: Agreement with the statement ‘In general, I trust private health providers to treat their customers fairly’, June 2011
                                                                                                                                  • Around 7% of consumers have looked into getting some health cover
                                                                                                                                  • Targeting Opportunities

                                                                                                                                    • Key pooints
                                                                                                                                      • Key target groups
                                                                                                                                        • Figure 44: Key target groups, June 2011
                                                                                                                                        • Figure 45: Attitudes towards health and healthcare, by target groups, June 2011
                                                                                                                                      • Hygiene worriers
                                                                                                                                        • Waiting list worriers
                                                                                                                                          • The split majority
                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                              • Figure 46: Forecast for PMI gross earned premiums, by sector, 2011-16
                                                                                                                                              • Figure 47: Forecast for corporate PMI gross earned premiums, 2006-16
                                                                                                                                              • Figure 48: Forecast for personal PMI gross earned premiums, 2006-16
                                                                                                                                              • Figure 49: Forecast for the number of PMI subscribers, 2011-16
                                                                                                                                              • Figure 50: Forecast for total number of PMI subscribers, 2006-16
                                                                                                                                              • Figure 51: Forecast for total number of corporate PMI subscribers, 2006-16
                                                                                                                                              • Figure 52: Forecast for total number of personal PMI subscribers, 2006-16
                                                                                                                                              • Figure 53: Forecast for the number of people covered by PMI, 2011-16
                                                                                                                                              • Figure 54: Forecast for total number of people covered by PMI, 2006-16
                                                                                                                                              • Figure 55: Forecast for total number of people covered by corporate PMI, 2006-16
                                                                                                                                              • Figure 56: Forecast for total number of people covered by personal PMI, 2006-16
                                                                                                                                              • Figure 57: Forecast for the number of health cash plan subscribers, people covered and contribution income earned, 2011-16
                                                                                                                                              • Figure 58: Forecast for the number of HCP contributors, 2006-16
                                                                                                                                              • Figure 59: Forecast for the number of people covered by a HCP, 2006-16
                                                                                                                                          • Appendix – Product Ownership Levels

                                                                                                                                              • Figure 60: Health insurance ownership, by demographics, June 2011
                                                                                                                                              • Figure 61: Health insurance ownership, by demographics, June 2011
                                                                                                                                          • Appendix – Consumers and the NHS

                                                                                                                                              • Figure 62: Agreement with the statement ‘On the whole, the NHS does a really good job’, by demographics, June 2011
                                                                                                                                              • Figure 63: Agreement with the statementI’ think that the proposed reforms to the NHS will reduce the standard of care available’, by demographics, June 2011
                                                                                                                                          • Appendix – Attitudes Towards Health and Private Care

                                                                                                                                              • Figure 64: Agreement with the statement ‘In general, I trust private health providers to treat their customers fairly’, by demographics, June 2011
                                                                                                                                              • Figure 65: Attitudes towards health and healthcare, by demographics, June 2011
                                                                                                                                              • Figure 66: Attitudes towards health and healthcare, by demographics, June 2011
                                                                                                                                          • Appendix – Targeting Opportunities

                                                                                                                                              • Figure 67: Target groups, by demographics, June 2011

                                                                                                                                          Companies Covered

                                                                                                                                          • Association of British Insurers
                                                                                                                                          • Aviva Plc
                                                                                                                                          • AXA PPP healthcare
                                                                                                                                          • Birmingham Hospital Saturday Fund
                                                                                                                                          • British Insurance Brokers Association
                                                                                                                                          • BUPA
                                                                                                                                          • CS Healthcare
                                                                                                                                          • Foresters Friendly Society
                                                                                                                                          • Hospital Savings Association [HSA]
                                                                                                                                          • Laing & Buisson
                                                                                                                                          • Legal & General Group PLC
                                                                                                                                          • Prudential plc
                                                                                                                                          • Saga Services (finance)
                                                                                                                                          • SimplyHealth Group Ltd
                                                                                                                                          • Sovereign Health Care
                                                                                                                                          • Standard Life Bank Limited
                                                                                                                                          • Standard Life Healthcare
                                                                                                                                          • The Benenden Healthcare Society Limited
                                                                                                                                          • The Chartered Insurance Institute
                                                                                                                                          • WPA [healthcare]

                                                                                                                                          Private Medical Insurance and Health Cash Plans - UK - August 2011

                                                                                                                                          £1,995.00 (Excl.Tax)