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Healthcare Cash Plan and Private Medical Insurance Market - UK - September 2012

Some questions answered in this report include:

  • How many people are aware about the costs of private healthcare?
  • Have price comparison websites made a breakthrough in the PMI and HCP markets?
  • Can the government help to boost demand for PMI and lower the burden on the NHS?
  • Have planned changes to the NHS boosted interest towards private medical insurance?

About the UK Healthcare Cash Plan and Private Medical Insurance Market

A depressed economy and a squeeze on household incomes has had a negative impact on the private medical insurance and health cash plan markets, as the value and volume of new sales declined in both markets during 2011. Given the ongoing economic challenges, and the return to a technical recession, and there is little to suggest that new sales will improve during 2012 as persistently high unemployment and low consumer confidence hits spending on discretionary items, such as private medical insurance. As a result, the focus will continue to be on customer retention as high levels of churn have increased acquisition costs and reduced the return on investment when it comes to obtaining new customers. Despite widespread support for the NHS, uncertainty about waiting lists and the general standards of healthcare in the NHS could increase interest towards private medical insurance. Providers need to educate consumers about the value of private medical insurance, and focus on positive aspects such a quick access to specialists and procedures in order to capitalise on government changes to the NHS.

One of the long term challenges to the UK private medical sector is spiralling medical costs, which is putting pressure on insurers’ margins. Additionally, the referral of the private healthcare market to the Competition Commission could have an impact on future operations, if the decision adversely affects certain business practices. However, the final verdict on the private healthcare market could lead to improvements in the sector and could be a positive step in the long term.

This report examines the PMI and HCP markets, analysing some of the main challenges currently facing the overall industry. Analysis also covers the wider economic conditions, recent innovations and distribution trends in the PMI and HCP markets. There is a full breakdown of market size, with a forecast showing the expected growth over the next five years. The report concludes with Mintel’s exclusively commissioned research exploring product ownership, purchasing and switching intentions and a look at consume attitudes towards the NHS and private medical insurance.

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The market
              • PMI gross earned premium expected to increase
                • Figure 1: Forecast for total PMI gross earned premium (GEP), 2007-17
              • HCP contribution income to rebound in the next five years
                • Figure 2: Forecast for HCP contribution income earned, 2007-17
              • Channels to market
                • Market factors
                  • There is already discontent about NHS cuts and quality of services
                    • Economic challenges have made it difficult to sell PMI and HCPs
                      • The average cost of PMI cover keeps rising, in both the personal and corporate sectors
                        • Competition Commission to look into the private healthcare market
                          • Companies, brands and innovation
                            • Bupa is the leading PMI provider, accounting for 40% of new premiums in 2011
                              • Figure 3: PMI provider market shares, by income, 2011
                            • Simplyhealth continues to dominate the health cash plan market
                              • Figure 4: Top five HCP provider market shares, by income, 2011
                            • Brand promotion
                              • Who’s innovating?
                                • The consumer
                                  • Medical insurance ownership
                                    • Figure 5: Medical insurance ownership, May 2012
                                  • Sources of information
                                    • Consumer attitudes towards the NHS
                                      • Figure 6: Consumers and the NHS, May 2012
                                    • Consumer attitudes towards private healthcare and insurance
                                      • Figure 7: Consumers and private medical care, May 2012
                                    • Switching and purchasing intentions
                                      • What we think
                                      • Issues in the Market

                                          • How many people are aware about the costs of private healthcare?
                                            • Have price comparison websites made a breakthrough in the PMI and HCP markets?
                                              • Can the government help to boost demand for PMI and lower the burden on the NHS?
                                                • Have planned changes to the NHS boosted interest towards private medical insurance?
                                                • Trend Application

                                                  • Conveying the advantages of PMI
                                                    • Repositioning PMI as a product which could ease the pressure on the NHS
                                                      • 2015: East Meets West
                                                      • Market Drivers

                                                        • Key points
                                                          • NHS spending projected to keep increasing until 2014/15
                                                            • Figure 8: Total public spending on the NHS, 2006/07-2014/15
                                                          • NHS is a source of pride for many adults…
                                                            • …however deteriorating service could increase appeal of PMI
                                                              • Weak economic performance is a challenge for the PMI and HCP markets
                                                                • Figure 9: GDP quarterly percentage change, Q1 2008-Q2 2012
                                                              • Some respite for private medical insurers as claims fell in 2011
                                                                • Figure 10: Value of total PMI claims and as a proportion of GEP, 2002-11
                                                              • Average PMI continue to increase, especially in the personal sector
                                                                • Figure 11: Average PMI premiums, by corporate and personal sectors, 2002-11
                                                              • HCP claims increase in 2011
                                                                • Figure 12: Amount of HCP cash benefits paid and benefits paid as a percentage of contribution income earned, 2004-11
                                                              • PMI disputes make up a small percentage of overall complaints to the FOS
                                                                • Figure 13: Financial services complaints, by sector, 2008/09-2011/12
                                                              • More employers offer PMI than HCPs
                                                                • Figure 14: Proportion of employers offering particular benefits as core, March 2012
                                                              • Private healthcare market under investigation by Competition Commission
                                                              • SWOT Analysis

                                                                  • Figure 15: SWOT analysis of the health insurance market, 2012
                                                              • Who’s Innovating?

                                                                • Key points
                                                                  • Exeter Family Friendly launches modular plan, follows up with an app
                                                                    • Westfield adds Best Doctors and Rewards to its range of HCPs
                                                                      • Simplyhealth corporate cash plans to have option for PMI excess
                                                                        • Combining the UK and International PMI markets
                                                                          • Aviva and AXA PPP improve their cancer cover offerings
                                                                            • Facebook app allows users to compare health scores
                                                                            • Market Size and Forecast

                                                                              • Key points
                                                                                • Number of new PMI subscribers and people covered continues to fall…
                                                                                  • Figure 16: Number of subscribers and people covered by PMI, by sector, 2004-12
                                                                                • …putting a strain on personal and corporate GEP in 2011
                                                                                  • Figure 17: Gross earned premium (GEP) for PMI, by sector, 2003-12
                                                                                • Number of HCP contributors falls by 1.5% in 2011
                                                                                  • Figure 18: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2004-12
                                                                                • Market forecast
                                                                                  • PMI gross earned premium is expected to increase…
                                                                                    • Figure 19: Forecast for total PMI gross earned premium (GEP), 2007-17
                                                                                    • Figure 20: Forecast for total value of new PMI gross earned premium, at current and constant prices, 2007-17
                                                                                  • …as will HCP contribution income earned
                                                                                    • Figure 21: Forecast for HCP contribution income earned, 2007-17
                                                                                    • Figure 22: Forecast for HCP contribution income earned, at current and constant prices, 2007-17
                                                                                  • Forecast methodology
                                                                                  • Market Share

                                                                                    • Key points
                                                                                      • Bupa continues to dominate the PMI market
                                                                                        • Figure 23: PMI provider market shares, by income, 2011
                                                                                        • Figure 24: PMI subscription income, 2004-11
                                                                                      • Simplyhealth is the number one HCP provider
                                                                                        • Figure 25: HCP market share, by income, 2006-11
                                                                                    • Companies and Products

                                                                                      • Aviva
                                                                                        • AXA PPP Healthcare
                                                                                          • Bupa
                                                                                            • PruHealth
                                                                                              • Simplyhealth
                                                                                              • Brand Communication and Promotion

                                                                                                • Key points
                                                                                                  • Adspend on PMI down by 6% in the year to May 2012
                                                                                                    • Figure 26: Private medical insurance adspend, 2009/10-2011/12*
                                                                                                  • Insurers face dilemma over advertising spend and opportunities from NHS changes
                                                                                                    • Bupa continues to be the number one advertiser of PMI products
                                                                                                      • Figure 27: Top 20 advertisers of PMI, by expenditure, 2009/10-2011/12
                                                                                                    • TV and direct mail advertising are the most popular ways to promote PMI
                                                                                                      • Figure 28: Private medical insurance adspend, by media type, 2009/10-2011/12
                                                                                                  • Channels to Market

                                                                                                    • Key points
                                                                                                      • Corporate PMI sales driven by intermediated distribution…
                                                                                                        • Figure 29: Proportional distribution of PMI sales, by sales channel, 2006-11
                                                                                                      • …and intermediaries are also making in-roads into the personal sector
                                                                                                        • Online sales are still relatively small, but the internet is a widely used source for information
                                                                                                          • Direct sales dominate the overall HCP market
                                                                                                            • Figure 30: Proportional distribution of HCP sales, by sales channel, 2009-11
                                                                                                        • Medical Insurance Ownership

                                                                                                          • Key points
                                                                                                            • Just over a quarter of adults have some form of health insurance
                                                                                                              • Figure 31: Health insurance ownership, May 2012
                                                                                                            • One in nine has money set aside, while 64% have no cover or savings for treatment
                                                                                                              • Consumer affluence has an impact on health insurance ownership
                                                                                                                • Figure 32: Health insurance ownership, by socio-economic grouping and gross annual household income, May 2012
                                                                                                              • Homeowners have a preference for self-insurance
                                                                                                                • Figure 33: Health insurance ownership, by housing situation, May 2012
                                                                                                              • Londoners are most likely to have any health insurance and PMI
                                                                                                                • Figure 34: Health insurance ownership, by region, May 2012
                                                                                                              • Consumers are most likely to have one type of health insurance…
                                                                                                                • Figure 35: Repertoire of health insurance ownership, May 2012
                                                                                                              • …but there is some multiple product ownership
                                                                                                                • Figure 36: Health insurance ownership, by health insurance ownership, May 2012
                                                                                                            • Sources of Information

                                                                                                              • Key points
                                                                                                                • Employers and friends or family are the most popular sources of information
                                                                                                                  • Figure 37: Sources of information, May 2012
                                                                                                                • Online sources are used by many…
                                                                                                                  • …but a fifth still turn to professional advice
                                                                                                                    • The majority of consumers use one source of information
                                                                                                                      • Figure 38: Repertoire of sources of information, May 2012
                                                                                                                    • Some sources are more suitable for certain products
                                                                                                                      • Figure 39: Sources of information, by health insurance ownership, May 2012
                                                                                                                  • Consumer Attitudes Towards the NHS

                                                                                                                    • Key points
                                                                                                                      • The majority of adults are supportive of the NHS, despite reservations about hygiene and waiting lists
                                                                                                                        • Figure 40: Consumers and the NHS, May 2012
                                                                                                                      • Uncertainty about government changes could help increase interest in PMI and HCPs
                                                                                                                        • The elderly are the biggest supporters of NHS services
                                                                                                                          • Figure 41: Consumers and the NHS, by gender and age, May 2012
                                                                                                                        • Affluent consumers are slightly more critical of the NHS
                                                                                                                          • Figure 42: Consumers and the NHS, by socio-economic grouping and gross annual household income, May 2012
                                                                                                                        • PMI holders more likely to feel let down by NHS, while HCP holders are more positive
                                                                                                                          • Figure 43: Consumers and the NHS, by most health insurance ownership, May 2012
                                                                                                                      • Consumer Attitudes Towards Private Healthcare and Insurance

                                                                                                                        • Key points
                                                                                                                          • Many are unsure about healthcare costs, while some are priced out of the insurance market
                                                                                                                            • Figure 44: Consumers and private healthcare, May 2012
                                                                                                                          • Over-65s are most likely to be priced out of the market
                                                                                                                            • A third of PMI owners have little idea about the cost of private healthcare
                                                                                                                              • Figure 45: Consumers and private health care, by health insurance ownership, May 2012
                                                                                                                            • Insurers should try to capture consumers that have money set aside for treatment
                                                                                                                              • Figure 46: Consumers and private health care, by most popular health insurance ownership, May 2012
                                                                                                                            • Policyholders more likely to trust private health providers
                                                                                                                              • Figure 47: Consumers and private health care, by health insurance ownership, May 2012
                                                                                                                          • Switching and Purchasing Intentions

                                                                                                                            • Key points
                                                                                                                              • Around 9% of internet users are thinking about switching or taking out a new PMI policy
                                                                                                                                • Figure 48: Consumer purchasing intentions, May 2012
                                                                                                                              • Significant churn in the private medical insurance market
                                                                                                                                • Figure 49: Consumer purchasing intentions, by most popular health insurance ownership, May 2012
                                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                              • PMI forecast tables
                                                                                                                                • Figure 50: Best and worst case forecast for total PMI gross earned premium, 2012-17
                                                                                                                                • Figure 51: Forecast for personal PMI gross earned premium, 2007-17
                                                                                                                                • Figure 52: Best and worst case forecast for personal PMI gross earned premium, 2012-17
                                                                                                                                • Figure 53: Forecast for personal PMI gross earned premium, at current and constant prices, 2007-17
                                                                                                                                • Figure 54: Forecast for corporate PMI gross earned premium, 2007-17
                                                                                                                                • Figure 55: Best and worst case forecast for corporate PMI gross earned premium, 2012-17
                                                                                                                                • Figure 56: Forecast for corporate PMI gross earned premium, at current and constant prices, 2007-17
                                                                                                                                • Figure 57: Forecast for total number of PMI subscribers, 2007-17
                                                                                                                                • Figure 58: Best and worst case forecast for total number of PMI subscribers, 2012-17
                                                                                                                                • Figure 59: Forecast for total number of personal PMI subscribers, 2007-17
                                                                                                                                • Figure 60: Best and worst case forecast for total number of personal PMI subscribers, 2012-17
                                                                                                                                • Figure 61: Forecast for total number of corporate PMI subscribers, 2007-17
                                                                                                                                • Figure 62: Best and worst case forecast for total number of corporate PMI subscribers, 2012-17
                                                                                                                                • Figure 63: Forecast for total number of people covered by PMI, 2007-17
                                                                                                                                • Figure 64: Best and worst case forecast for total number of people covered by PMI, 2012-17
                                                                                                                                • Figure 65: Forecast for total number of people covered by personal PMI, 2007-17
                                                                                                                                • Figure 66: Best and worst case forecast for total number of people covered by personal PMI, 2012-17
                                                                                                                                • Figure 67: Forecast for total number of people covered by corporate PMI, 2007-17
                                                                                                                                • Figure 68: Best and worst case forecast for total number of people covered by corporate PMI, 2012-17
                                                                                                                              • HCP forecast tables
                                                                                                                                • Figure 69: Best and worst case forecast for total HCP contribution income earned, 2012-17
                                                                                                                                • Figure 70: Forecast for total number of HCP contributors, 2007-17
                                                                                                                                • Figure 71: Best and worst case forecast for total number of HCP contributors, 2012-17
                                                                                                                                • Figure 72: Forecast for total number of people covered by HCPs, 2007-17
                                                                                                                                • Figure 73: Best and worst case forecast for total HCP contribution income earned, 2012-17
                                                                                                                            • Appendix – Medical Insurance Ownership

                                                                                                                                • Figure 74: Health insurance ownership, by demographics, May 2012
                                                                                                                                • Figure 75: Health insurance ownership, by demographics, May 2012
                                                                                                                                • Figure 76: Repertoire of health insurance ownership, by demographics, May 2012
                                                                                                                            • Appendix – Sources of Information

                                                                                                                                • Figure 77: Sources of information, by demographics, May 2012
                                                                                                                                • Figure 78: Repertoire of sources of information, by demographics, May 2012
                                                                                                                            • Appendix – Consumer Attitudes Towards the NHS

                                                                                                                                • Figure 79: Agreement with the statements ‘On the whole the NHS does a really good job’ and ‘I think that government reforms of the NHS will improve the standard of care available’, by demographics, May 2012
                                                                                                                                • Figure 80: Agreement with the statements ‘The changes in the NHS will make me more likely to take out private medical insurance or some sort of health care plan’ and ‘I am worried about superbugs and the standard of hygiene in NHS hospitals’, by demographics, May 2012
                                                                                                                                • Figure 81: Agreement with the statements ‘NHS waiting lists are too long’ and ‘I’ve been let down or know someone who has been let down by the NHS’, by demographics, May 2012
                                                                                                                            • Appendix – Consumer Attitudes Towards Private Healthcare and Insurance

                                                                                                                                • Figure 82: Agreement with statements ‘I have no idea how much private healthcare would cost me’ and ‘In the last few years I have either cancelled private health cover policies or downgraded to a lower level of cover’, by demographics, May 2012
                                                                                                                                • Figure 83: Agreement with statements ‘In general I trust private health providers to treat their customers fairly’ and ‘I’ve looked into getting some kind of private health cover, but it was too expensive’, by demographics, May 2012
                                                                                                                                • Figure 84: Agreement with statements ‘I’ve been let down or know someone who has been let down by a private hospital/health insurer’, by demographics, May 2012
                                                                                                                            • Appendix – Switching and Purchasing Intentions

                                                                                                                                • Figure 85: Consumer switching and purchasing intentions, by demographics, May 2012
                                                                                                                                • Figure 86: Consumer switching and purchasing intentions, by demographics, May 2012

                                                                                                                            Companies Covered

                                                                                                                            • Aviva Plc
                                                                                                                            • AXA PPP healthcare
                                                                                                                            • AXA UK plc
                                                                                                                            • BUPA
                                                                                                                            • Cineworld
                                                                                                                            • Facebook, Inc.
                                                                                                                            • Groupama Insurances
                                                                                                                            • J. Sainsbury
                                                                                                                            • Prudential plc
                                                                                                                            • SimplyHealth Group Ltd
                                                                                                                            • Thomas Cook Group PLC
                                                                                                                            • Twitter, Inc.
                                                                                                                            • YouTube, Inc.

                                                                                                                            Healthcare Cash Plan and Private Medical Insurance Market - UK - September 2012

                                                                                                                            £1,995.00 (Excl.Tax)