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Private Medical Insurance - UK - November 2013

“Providers must meet the twin challenges of developing affordable propositions and managing spiralling medical costs, in order to stop the decline in the number of subscribers.”

– Sarah Hitchcock, Senior Analyst – Financial Services

Some questions answered in this report include:

  • What proportion of UK adults have private health cover?
  • Why is demand falling?
  • Is policy switching set to increase?
  • How can providers stop the decline in penetration?
  • How can providers persuade more SMEs to offer cover to their staff?

The UK private medical insurance (PMI) market is mature and heavily consolidated. Just two providers account for two thirds of the industry’s total premium income. It is also a market in decline. Between 2008 and 2012, the total number of people covered by either a personal or corporate plan decreased by 10%. There is some uncertainty over the durability of this trend – much may depend on how effective providers are at containing costs and their ability to pass on these cost savings to customers in the form of lower premiums.

While the contraction in demand has been at least in part due to the economic downturn, it is also linked to a sharp rise in the cost of cover, which has been driven up by medical inflation. This has impacted both sectors of the PMI market. However, the effects have been more acutely felt in the personal sector, where the decline has been more marked. In addition, the fall in corporate PMI sales has been partially offset by a rise in self-insured business. Although essentially a rival solution to corporate PMI, most self-insured schemes are administered by insurance companies.

Mintel’s report examines all these issues and trends in detail. By drawing on a range of information and trade sources, it explores the likelihood of a turnaround in the market and the ways in which this can be best achieved. Mintel’s market analysis is complemented by the results of an independently commissioned consumer survey, which provides insight into the attitudes and behaviours of those covered by PMI, as well as general public perceptions of national and private healthcare services.

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Table of contents

  1. Introduction

      • Product definitions and report coverage
        • Types of health cover
          • Abbreviations
          • Executive Summary

              • The market
                • Standard model predicts slow premium growth
                  • Figure 1: Forecast of total new PMI premiums, at current prices – fan chart, 2008-18
                • Size of the subscriber base
                  • Figure 2: Number of PMI subscribers and people covered, by sector, 2008-13
                • Claims costs and market profitability
                  • Market factors
                    • Challenging economic backdrop
                      • NHS under financial pressure
                        • Intervention by the Competition Commission
                          • Alternative solutions
                            • Company, brands and innovation
                              • Two brands dominate
                                • Figure 3: Top five providers’ market shares, based on subscription income, 2012
                              • Product innovation
                                • Brand reinforcement
                                  • Distribution trends
                                    • Figure 4: Share of PMI sales, by distribution channel, 2009-12
                                  • The consumer
                                    • Penetration of PMI
                                      • Figure 5: Ownership of health cover and protection products, October 2013
                                    • Customer views and claims experience
                                      • Intentions to switch, cancel or downgrade cover
                                        • Figure 6: Intentions relating to downgrading/cancelling cover and switching providers, October 2013
                                      • Barriers to take-up
                                        • Figure 7: Reasons for not having private health insurance (top eight), October 2013
                                      • Difficulties and delays accessing NHS treatment
                                        • Figure 8: Experience of difficulties or delays in accessing NHS care (top eight), October 2013
                                      • Concerns over the NHS’s future
                                        • Potential market expansion
                                          • What we think
                                          • Issues in the Market

                                              • What proportion of UK adults have private health cover?
                                                • Why is demand falling?
                                                  • Is policy switching set to increase?
                                                    • How can providers stop the decline in penetration?
                                                      • How can providers persuade more SMEs to offer cover to their staff?
                                                      • Trend Applications

                                                        • Trend: Let’s Make a Deal
                                                          • Trend: Moral Brands
                                                            • Futures: Generation Next
                                                            • Market Drivers

                                                              • Key points
                                                                • Rising cost pressures prompt some PMI subscribers to consider downgrading their level of cover
                                                                  • Services sector sees increase in profitability…
                                                                    • Figure 9: Net rate of return of private non-financial corporations, 2003 Q1-2013 Q2
                                                                  • …but new pension duties could lead to companies cutting back on existing perks
                                                                    • Similarly, an ageing workforce has extra cost implications
                                                                      • A high level of interest in low-cost corporate PMI
                                                                        • Figure 10: Proportion of employers offering selected benefits as core, March 2013
                                                                      • Rising medical costs underpin strong PMI premium inflation
                                                                        • Figure 11: Average PMI premium, by sector, 2003-12
                                                                      • Competition Commission’s investigation into private healthcare services
                                                                        • People are living longer, but not necessarily in good health
                                                                          • Health and lifestyle trends
                                                                            • Slowdown in NHS spending puts greater financial pressure on NHS hospitals
                                                                              • Figure 12: NHS net expenditure, 2008/09-2015/16
                                                                            • … potentially leading to longer waiting lists…
                                                                              • … and more cancelled operations
                                                                              • Rival Products and Alternative Solutions

                                                                                • Key points
                                                                                  • Healthcare funding options
                                                                                    • Figure 13: The main methods of obtaining healthcare treatment in the UK, 2013
                                                                                  • More than 1.2 million people are covered by a self-insured scheme
                                                                                    • Figure 14: Number of subscribers and people covered by PMI and healthcare trust schemes, 2008-12
                                                                                  • Concerns about the further of the NHS should fuel interest in health cover products
                                                                                    • Penetration of health cover and protection products
                                                                                      • Figure 15: Penetration of health cover products, October 2013
                                                                                    • Health cash plan market experiences sharp contraction in the number of people covered
                                                                                      • Figure 16: Number of health cash plan subscribers, people covered and contribution income earned, 2008-12
                                                                                  • Market SWOT Analysis

                                                                                      • Figure 17: The PMI market– SWOT analysis, 2013
                                                                                  • Who’s Innovating?

                                                                                    • Key points
                                                                                      • Providers are continually exploring ways of making their products more attractive and affordable
                                                                                        • PruHealth planning to make key improvements to its personal PMI proposition
                                                                                          • Simplyhealth offers customers greater flexibility with new propositions for individuals and SMEs
                                                                                            • Aviva offers corporate clients new open referral plan…
                                                                                              • …and revamps individual PMI offering
                                                                                                • AXA PPP launches healthcare master trust
                                                                                                  • Bupa unveils new breast cancer network and improves its direct-to-consumer product
                                                                                                    • PMI comparison site launched
                                                                                                      • Growth of the international cover market
                                                                                                      • Market Size and Forecast

                                                                                                        • Key points
                                                                                                          • Demand for PMI continues to recede…
                                                                                                            • Figure 18: Number of PMI subscribers, people covered and gross earned premiums, 2008-12
                                                                                                          • …while premiums move up, driven by rising cost pressures
                                                                                                            • The market should continue to grow, albeit at a very steady rate
                                                                                                              • Figure 19: Forecast of total PMI gross earned premiums, at current prices – fan chart, 2008-18
                                                                                                              • Figure 20: Forecast of PMI gross earned premiums, at current and constant prices, 2008-18
                                                                                                            • Premium rate growth
                                                                                                              • Forecast methodology
                                                                                                                • Fan chart explanation
                                                                                                                • Market Segmentation

                                                                                                                  • Key points
                                                                                                                    • Personal business represents an important revenue stream
                                                                                                                      • Figure 21: Proportional distribution of PMI subscribers, people covered and gross earned premiums, by sector, 2013
                                                                                                                    • The decline in subscribers has occurred across both sectors
                                                                                                                      • Figure 22: Number of PMI subscribers and people covered, by sector, 2008-13
                                                                                                                    • The corporate sector is driving premium growth
                                                                                                                      • Figure 23: PMI gross earned premiums, by sector, 2008-13
                                                                                                                  • Claims Paid and Market Profitability

                                                                                                                    • Key points
                                                                                                                      • Premium income keeps pace with the cost of claims incurred
                                                                                                                        • Figure 24: PMI gross earned premiums and claim amounts incurred, 2002-12
                                                                                                                      • Gross margins have improved over the past two years…
                                                                                                                        • Figure 25: Claim amounts incurred as a proportion of gross earned premium, 2008-12
                                                                                                                      • … but maintaining profits comes at a price
                                                                                                                        • Overall sector profit
                                                                                                                        • Market Share

                                                                                                                          • Key points
                                                                                                                            • A mature market dominated by a handful of established brands
                                                                                                                              • Bupa and AXA PPP continue to dominate the market
                                                                                                                                • Figure 26: Top five providers’ market shares, based on subscription income, 2012
                                                                                                                              • Third-placed Aviva put in a strong performance in 2012
                                                                                                                                • Figure 27: PMI subscription income, 2008-12
                                                                                                                              • Third-party administrators
                                                                                                                              • Companies and Products

                                                                                                                                • Bupa
                                                                                                                                  • PMI market position
                                                                                                                                    • PMI subscription income
                                                                                                                                      • Description
                                                                                                                                        • Product range
                                                                                                                                          • Financial performance
                                                                                                                                            • Figure 28: Key financial data for Bupa, 2011-12
                                                                                                                                          • Recent activity
                                                                                                                                            • AXA PPP healthcare
                                                                                                                                              • PMI market position
                                                                                                                                                • PMI subscription income
                                                                                                                                                  • Description
                                                                                                                                                    • Product range
                                                                                                                                                      • Financial performance
                                                                                                                                                        • Figure 29: Key financial data for AXA PPP healthcare, 2011-12
                                                                                                                                                      • Recent activity
                                                                                                                                                        • Aviva
                                                                                                                                                          • PMI market position
                                                                                                                                                            • PMI subscription income
                                                                                                                                                              • Description
                                                                                                                                                                • Product range
                                                                                                                                                                  • Financial performance
                                                                                                                                                                    • Figure 30: Key financial data for Aviva plc, 2011-12
                                                                                                                                                                  • Recent activity
                                                                                                                                                                    • PruHealth
                                                                                                                                                                      • PMI market position
                                                                                                                                                                        • PMI subscription income
                                                                                                                                                                          • Description
                                                                                                                                                                            • Product Range
                                                                                                                                                                              • Financial performance
                                                                                                                                                                                • Recent activity
                                                                                                                                                                                  • Simplyhealth
                                                                                                                                                                                    • PMI market position
                                                                                                                                                                                      • PMI subscription income
                                                                                                                                                                                        • Description
                                                                                                                                                                                          • Product range
                                                                                                                                                                                            • Financial performance
                                                                                                                                                                                              • Figure 31: Key financial data for Simplyhealth Group, 2011-12
                                                                                                                                                                                            • Recent activity
                                                                                                                                                                                              • WPA
                                                                                                                                                                                                • PMI market position
                                                                                                                                                                                                  • PMI subscription income
                                                                                                                                                                                                    • Description
                                                                                                                                                                                                      • Product range
                                                                                                                                                                                                        • Financial performance
                                                                                                                                                                                                          • Recent activity
                                                                                                                                                                                                            • Other significant brands
                                                                                                                                                                                                            • Brand Communication and Promotion

                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                • Sharp drop in PMI adspend in the year to August 2013
                                                                                                                                                                                                                  • Figure 32: Advertising expenditure on private medical insurance, 2009-13
                                                                                                                                                                                                                • TV and direct mail account for the largest proportion of spend
                                                                                                                                                                                                                  • Figure 33: Proportional distribution of health insurance adspend, by media type, 2009-13
                                                                                                                                                                                                                • Simplyhealth becomes the top PMI advertiser in 2013
                                                                                                                                                                                                                  • Figure 34: Top ten advertisers of health insurance products, 2009-13
                                                                                                                                                                                                                • Sponsorship activity
                                                                                                                                                                                                                  • A note on adspend
                                                                                                                                                                                                                  • Channels to Market

                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                      • Intermediaries generate the majority of corporate PMI sales…
                                                                                                                                                                                                                        • Figure 35: Share of PMI sales, by distribution channel, 2009-12
                                                                                                                                                                                                                      • … while most individual sales are arranged direct
                                                                                                                                                                                                                      • Ownership of Health Cover & Protection Products

                                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                                          • Survey background
                                                                                                                                                                                                                            • Around one in six UK adults have private medical insurance
                                                                                                                                                                                                                                • Figure 36: Ownership of PMI and other health and protection products, October 2013
                                                                                                                                                                                                                              • Significant product overlap
                                                                                                                                                                                                                                • Figure 37: Ownership of healthcare and protection products – cross-analysis, October 2013
                                                                                                                                                                                                                              • The typical PMI subscriber is a 25-54-year-old male AB
                                                                                                                                                                                                                                • Significant opportunities to improve product penetration
                                                                                                                                                                                                                                • Policyholder Views and Claims Experience

                                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                                    • Three out of four PMI member are satisfied with their level of cover
                                                                                                                                                                                                                                        • Figure 38: Agreement with statements about policy cover and claims experiences, by type of policy held, October 2013
                                                                                                                                                                                                                                      • Around one in six corporate PMI members don’t know what cover level they have
                                                                                                                                                                                                                                        • Relatively low level of PMI claims are turned down
                                                                                                                                                                                                                                          • Figure 39: Claims experience, October 2013
                                                                                                                                                                                                                                        • No-claims bonuses are more common in the personal sector…
                                                                                                                                                                                                                                          • … as are rewards for leading a healthy lifestyle
                                                                                                                                                                                                                                          • Downgrading, Cancelling and Switching Intentions

                                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                                              • Limited amount of customer churn despite strong intentions
                                                                                                                                                                                                                                                  • Figure 40: Past experience of and future intentions relating to downgrading and cancelling cover and switching providers, by type of policy held, October 2013
                                                                                                                                                                                                                                                • Around a fifth of personal PMI members are seriously considering downgrading their cover
                                                                                                                                                                                                                                                • Market Barriers

                                                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                                                    • The high cost of cover is the number one barrier to take-up
                                                                                                                                                                                                                                                        • Figure 41: Reasons for not having private health insurance, October 2013
                                                                                                                                                                                                                                                      • A large minority are content to be treated on the NHS
                                                                                                                                                                                                                                                        • One in 20 are lapsed policyholders
                                                                                                                                                                                                                                                        • Difficulty Accessing Healthcare on the NHS

                                                                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                                                                            • Getting to see a GP during work hours is top gripe
                                                                                                                                                                                                                                                              • Figure 42: Experience of difficulties or delays in getting access to NHS care, October 2013
                                                                                                                                                                                                                                                            • PMI members are more likely to have experienced difficulty or delay
                                                                                                                                                                                                                                                              • Figure 43: Experience of difficulties or delays in getting access to NHS care, October 2013
                                                                                                                                                                                                                                                          • Views on the NHS, Private Healthcare and Insurance

                                                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                                                              • Two in five adults expect NHS waiting lists to grow over the next five years
                                                                                                                                                                                                                                                                  • Figure 44: Agreement with statements about the NHS, private healthcare and health insurance, October 2013
                                                                                                                                                                                                                                                                • One in three are fans of private healthcare
                                                                                                                                                                                                                                                                  • Potential for further growth
                                                                                                                                                                                                                                                                  • Appendix – Additional Product Information

                                                                                                                                                                                                                                                                    • PMI cover types
                                                                                                                                                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                                                                                                                                                      • Historical market data
                                                                                                                                                                                                                                                                        • Figure 45: Number of subscribers and people covered by PMI, by sector, 2008-12
                                                                                                                                                                                                                                                                        • Figure 46: Gross earned premiums, by sector, 2008-12
                                                                                                                                                                                                                                                                      • Forecast of the volume of PMI subscribers
                                                                                                                                                                                                                                                                        • Figure 47: Forecast of PMI subscribers, by sector, 2013-18
                                                                                                                                                                                                                                                                      • Forecast of gross earned premiums
                                                                                                                                                                                                                                                                        • Figure 48: Forecast of PMI gross earned premiums, at current and constant prices, 2008-18
                                                                                                                                                                                                                                                                      • Total market forecast – best- and worst-case scenarios
                                                                                                                                                                                                                                                                        • Figure 49: Forecast of total PMI gross earned premiums – best- and worst-case scenarios, at current prices, 2013-18
                                                                                                                                                                                                                                                                      • Corporate sector forecast
                                                                                                                                                                                                                                                                        • Figure 50: Forecast of new corporate PMI premiums, at current prices – fan chart, 2008-18
                                                                                                                                                                                                                                                                        • Figure 51: Forecast of corporate PMI premiums – best- and worst-case scenarios, at current prices, 2013-18
                                                                                                                                                                                                                                                                      • Personal sector forecast
                                                                                                                                                                                                                                                                        • Figure 52: Forecast of personal PMI premiums, at current prices – fan chart, 2008-18
                                                                                                                                                                                                                                                                        • Figure 53: Forecast of personal PMI premiums – best- and worst-case scenarios, at current prices, 2013-18
                                                                                                                                                                                                                                                                      • Forecast methodology
                                                                                                                                                                                                                                                                        • Fan chart explanation
                                                                                                                                                                                                                                                                        • Appendix – Ownership of Health Cover & Protection Products

                                                                                                                                                                                                                                                                            • Figure 54: Ownership of private health insurance, by demographics, October 2013
                                                                                                                                                                                                                                                                            • Figure 55: Ownership of other health cover and protection products, by demographics, October 2013
                                                                                                                                                                                                                                                                        • Appendix – Policyholder Views and Claims Experience

                                                                                                                                                                                                                                                                            • Figure 56: Policyholder attitudes and awareness of cover, by demographics, October 2013
                                                                                                                                                                                                                                                                            • Figure 57: Policyholder attitudes and claims experience, by demographics, October 2013
                                                                                                                                                                                                                                                                        • Appendix – Downgrading, Cancelling and Switching Intentions

                                                                                                                                                                                                                                                                            • Figure 58: Policyholders who are seriously considering downgrading their PMI cover, cancelling their policy or switching provider, October 2013
                                                                                                                                                                                                                                                                        • Appendix – Market Barriers

                                                                                                                                                                                                                                                                            • Figure 59: Top six reasons for not having private health insurance, by demographics, October 2013
                                                                                                                                                                                                                                                                            • Figure 60: Next six reasons for not having private health insurance, by demographics, October 2013
                                                                                                                                                                                                                                                                        • Appendix – Difficulty Accessing Healthcare on the NHS

                                                                                                                                                                                                                                                                            • Figure 61: Own experience of difficulties accessing NHS healthcare (top six), by demographics, October 2013
                                                                                                                                                                                                                                                                            • Figure 62: Own experience of difficulties accessing NHS healthcare (next six), by demographics, October 2013
                                                                                                                                                                                                                                                                        • Appendix – Views on the NHS, Private Healthcare and Insurance

                                                                                                                                                                                                                                                                            • Figure 63: Attitudes towards the NHS, private healthcare and health insurance, by demographics, October 2013

                                                                                                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                                                                                                        To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                                                                                        Private Medical Insurance - UK - November 2013

                                                                                                                                                                                                                                                                        £1,995.00 (Excl.Tax)