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Private Medical Insurance - UK - October 2015

“Subscription rates continue to fall, as many people are yet to see their disposable income increase enough to make paying for private medical insurance palatable. An increase in insurance premium tax set to take effect in November 2015 will lift prices further out of reach for potential new customers and far beyond more affordable products such as health cash plans. It remains to be seen whether the appeal of wearable technology and pocket-sized GPs can reinvigorate the market.”
– Patrick Ross, Financial Services Analyst

This report discusses the following key topics:

  • Targeting specific NHS bottlenecks could pay dividends
  • Insurers can make more out of remote and at-home services

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • The IPT increase is set to make future growth challenging
              • Figure 1: Forecast of total private medical insurance gross earned premiums, 2010-20
            • The number of subscribers is slipping year on year
              • Figure 2: Number of subscribers, by sector, 2010-14
            • Companies and brands
              • High concentration gives biggest players access to the best data
                • Figure 3: PMI providers’ market share, by gross earned premium, 2014*
              • Focusing on healthy lifestyles is great for marketing but also improves profitability
                • The consumer
                  • The same proportion of people say they set money aside for treatment as hold PMI policies
                    • Figure 4: Ownership of insurance or savings products for health needs, July 2015
                  • Over half rate their own health as good or excellent
                    • Figure 5: Perceived state of health, July 2015
                  • Everyday spending on health is more significant than many think
                    • Figure 6: Proportion that have had an appointment with a GP in the last two years, by age and gender, July 2015
                  • Access problems are overshadowing the quality of the NHS
                    • Figure 7: Satisfaction with the NHS, July 2015
                  • The NHS legacy dictates what people are willing to pay for
                    • Figure 8: Proportion expecting to pay for alternative medical treatments, by generation, July 2015
                  • The jury is out on the true ethics and value of PMI
                    • Figure 9: Attitudes towards cost and value in private medical insurance, July 2015
                  • Parents’ protective instinct may provide opportunities
                    • Figure 10: Attitudes towards coverage in private medical insurance, July 2015
                  • Negative attitudes towards the NHS persist despite positive experiences
                    • Figure 11: Attitudes towards the NHS in competition with private healthcare, July 2015
                  • What we think
                  • Issues and Insights

                    • Targeting specific NHS bottlenecks could pay dividends
                      • The facts
                        • The implications
                          • Insurers can make more out of remote and at-home services
                            • The facts
                              • The implications
                              • The Market – What You Need to Know

                                • Gross earned premiums rose by 2.8% in 2014…
                                  • …although numbers are dwindling and future growth will be challenging
                                    • Flat disposable income keeps PMI out of reach for many
                                      • Rising employment spells opportunity for big corporate distribution
                                        • Competitive pressure from more affordable products increases
                                          • The NHS will struggle to maintain high standards
                                            • Surprise IPT rise to be passed on through prices
                                            • Market Size and Forecast

                                              • Rising prices drive an artificial return to growth
                                                • Figure 12: Gross earned premium and claim amounts incurred, by sector, 2010-14
                                                • Figure 13: Average annual PMI premium, by sector, 2004-14
                                              • The number of subscribers is sliding year on year…
                                                • Figure 14: Number of subscribers, by sector, 2010-14
                                              • …and the number of people covered is following suit
                                                • Figure 15: Number of people covered, by sector, 2010-14
                                              • The IPT increase is set to make future growth challenging
                                                • Figure 16: Forecast of total private medical insurance gross earned premiums, 2010-20
                                                • Figure 17: Forecast of total private medical insurance gross earned premiums, at current and constant prices, 2010-20
                                            • Market Drivers

                                              • Disposable income stagnates despite the economic recovery
                                                • Figure 18: GDP per head at current market prices, and real household disposable income per head, Q1 2009-Q1 2015
                                              • Rising employment lifts the prospects of corporate distribution
                                                • Figure 19: Total UK unemployment rate among people aged 16+, January 2009-May 2015
                                              • Competitor products take precedence for ad-hoc medical needs
                                                • Figure 20: Top eight UK healthcare cash plan providers*, by gross earned premium, 2011-14
                                              • Self-pay shows double-digit growth
                                                • NHS keeps quality high but struggles with access
                                                  • Figure 21: Number of doctors* registered on the List of Registered Medical Practitioners (LRMP) at the end of each year (point in time), 2005-14 and September 2015
                                                • Surprise IPT increase set to push insurers to the limit…
                                                  • …and marginal profitability gains will do little to ease the pain
                                                    • Figure 22: Ratio of claims amounts incurred to gross earned premiums, 2000-14
                                                • Key Players – What You Need to Know

                                                  • High concentration gives biggest players access to the best data
                                                    • Focusing on healthy lifestyles is great for marketing but also improves profitability
                                                      • TV advertising is the star of the show as insurers vie for market share
                                                      • Market Share

                                                        • AXA mounts a challenge to Bupa’s market dominance
                                                          • Figure 23: PMI providers’ market share, by gross earned premium, 2014
                                                          • Figure 24: PMI market share, by gross earned premium, 2010-14
                                                      • Competitive Strategies

                                                        • The pursuit of health, wealth and happiness
                                                          • VitalityHealth (formerly PruHealth)
                                                            • AXA PPP
                                                              • The rise of the hassle-free GP
                                                                • Aviva
                                                                  • Exeter Friendly
                                                                    • VitalityHealth (formerly PruHealth)
                                                                      • Bupa
                                                                      • Advertising and Marketing Activity

                                                                        • Adspend is dominated by TV and direct mail
                                                                          • Figure 25: Recorded above-the-line, online display and direct mail advertising expenditure on private healthcare, by media type, 2012/13-2014/15*
                                                                        • Bupa invests heavily in promoting its brand
                                                                          • Smaller firms weigh in as they target more market share
                                                                            • Figure 26: Top 15 advertisers of private healthcare insurance, by recorded above-the-line, online display and direct mail advertising, 2012/13-2014/15*
                                                                          • Search and social media play an increasing role
                                                                            • Note on NMR data
                                                                            • The Consumer – What You Need to Know

                                                                              • Setting money aside is as popular as arranging PMI
                                                                                • Most people are confident about the state of their health
                                                                                  • The quality of the NHS is being negated by access issues
                                                                                    • People’s spending on everyday health is stacking up
                                                                                      • 30% expect to pay for treatments unavailable on the NHS
                                                                                        • Few think PMI is unethical, but paying for it raises questions
                                                                                          • Parents could future-proof the industry by protecting their children
                                                                                            • Broad negative perceptions of the NHS provide opportunities for insurers
                                                                                            • Product Ownership

                                                                                              • The same proportion of people say they set money aside for treatment as have PMI cover
                                                                                                • More are choosing to pay their own way
                                                                                                  • Health cash plans suffer from perceptions of everyday treatment
                                                                                                    • Figure 27: Ownership of insurance or savings products for health needs, July 2015
                                                                                                  • Men more likely to lead involvement with private healthcare
                                                                                                    • Figure 28: Product ownership, by gender, July 2015
                                                                                                  • 16-24s warrant more attention from insurers
                                                                                                    • Older people locked out of PMI market due to risk status
                                                                                                      • Figure 29: Product ownership, by age, July 2015
                                                                                                  • People’s Assessment of their Overall Health

                                                                                                    • Over half rate their own health as good or excellent
                                                                                                      • Poor health represents an ethical concern for insurers
                                                                                                        • Figure 30: Perceived state of health, July 2015
                                                                                                      • Low income can restrict access to PMI for those who need it most
                                                                                                        • Figure 31: Perceived state of health, by gross annual household income, July 2015
                                                                                                    • Use of Health Services

                                                                                                      • Everyday spending on health is more significant than many think
                                                                                                        • Figure 32: Personal use of routine health services, July 2015
                                                                                                      • The demand for GP services is high
                                                                                                        • Men are risking serious health issues by delaying diagnosis
                                                                                                          • Figure 33: Proportion that have had an appointment with a GP in the last two years, by age and gender, July 2015
                                                                                                        • The need for non-routine health services can be limited through better everyday care
                                                                                                          • Figure 34: Personal use of non-routine health services, July 2015
                                                                                                        • 18% of people have had little contact with healthcare services in last two years
                                                                                                          • Figure 35: Number of health-related activities in the last two years, July 2015
                                                                                                      • Satisfaction with the NHS

                                                                                                        • Access problems are overshadowing the quality of the NHS
                                                                                                          • Figure 36: Satisfaction with the NHS, July 2015
                                                                                                        • Experience of the NHS only improves the perception of quality
                                                                                                          • Figure 37: Proportion that are likely to have experience of NHS GPs, by satisfaction with selected aspects of NHS care, July 2015
                                                                                                        • A care crisis in London brings opportunity for insurers
                                                                                                          • Figure 38: Proportion that have any satisfaction with quality of medical care and access to GPs, by region, July 2015
                                                                                                      • Expectations about Paying for Health Services

                                                                                                        • The NHS legacy dictates what people are willing to pay for
                                                                                                          • Figure 39: Proportion expecting to pay for health services, July 2015
                                                                                                        • Private healthcare can deputise for NHS services that are jammed with demand
                                                                                                          • Figure 40: Proportion expecting to pay for alternative medical treatments, by generation, July 2015
                                                                                                        • People are underprepared for future mental health needs
                                                                                                        • Attitudes towards Private Medical Insurance

                                                                                                          • People are unsure about paying for private healthcare
                                                                                                            • Figure 41: Attitudes towards cost and value in private medical insurance, July 2015
                                                                                                          • The jury is out on the true ethics and value of PMI
                                                                                                            • Figure 42: Agreement with the statement ‘Private medical insurance is unethical’, by age, July 2015
                                                                                                          • Parents’ protective instinct may provide insurers with opportunities
                                                                                                            • Care is a difficult subject for insurance to address
                                                                                                              • Single-illness policies lack mass appeal despite a greater chance of diagnosis
                                                                                                                • Figure 43: Attitudes towards coverage in private medical insurance, July 2015
                                                                                                              • Negative attitudes towards the NHS persist despite positive experiences
                                                                                                                • Figure 44: Attitudes towards the NHS in competition with private healthcare, July 2015
                                                                                                            • Appendix – Market Size and Forecast

                                                                                                                • Figure 45: Forecast of annual earned private medical insurance premiums, 2015-20
                                                                                                              • Forecast methodology
                                                                                                                • Fan chart explanation
                                                                                                                • Appendix – Further Analysis

                                                                                                                    • Figure 46: CHAID analysis on attitudinal statements, July 2015
                                                                                                                  • Note on CHAID analysis

                                                                                                                  Companies Covered

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

                                                                                                                  Private Medical Insurance - UK - October 2015

                                                                                                                  £1,995.00 (Excl.Tax)