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Private Medical Insurance - UK - October 2016

“Providers must continue their efforts in regards to cost containment and product innovation, incorporating new digital technology to develop attractive propositions that meet the changing needs of consumers and to ensure the market’s future sustainability.”

Sarah Hitchcock, Senior Analyst – Financial Services

This report looks at the following areas:

  • Adapting to an ageing population
  • The challenge of balancing choice and simplicity

The market comprises two main sectors: personal and corporate. The corporate sector is much larger in terms of the number of people covered, and more stable. In contrast, the personal sector is in long-term steady decline, based on the number of subscribers. Yet it remains an important revenue stream, accounting for more than two fifths of premium income.

One of the major barriers to stemming this decline is product affordability – or, at least, perceived affordability. For this reason, company strategy tends to be focused on containing costs, alerting customers to the range of options that exist to help them reduce their premiums, and developing new lower-cost solutions.

Taking these issues into consideration, Mintel’s consumer research explores attitudes toward private healthcare and health insurance. It reveals what proportion of the non-insured are open to the idea of taking out a policy in the future and identifies the types of policy people are most interested in, as well as the benefits they consider the most appealing. It also looks at the claims experiences of existing policyholders and their short-term plans in regards to policy upgrades, downgrades, cancellations and switching.

For the purposes of this Report, Mintel has used the following product definitions:

  • Private medical insurance (also known as private health insurance) is designed to cover the costs of private treatment for what are commonly known as acute medical/surgical conditions (ie curable, short-term illnesses or injuries). The main advantage of having this cover is that it ensures prompt access to treatment should the policyholder become ill or injured.
  • Policies are either fully underwritten (requiring the policyholder to disclose their full medical history) or written on a moratorium basis (the policyholder needs to give more limited information and the policy excludes pre-existing conditions, whether or not diagnosed).

Alongside traditional PMI policies, there are a number of product variants. These include:

  • Condition-specific policy – covers the cost of private treatment for a specified condition or conditions, typically cancer and heart disease.
  • Treatment-only policy – covers the cost of private treatment and aftercare following an initial diagnosis on the NHS.
  • Treatment specific policy – this differs from the above in that it is designed to cover the cost of certain specified treatments, such as physiotherapy, psychiatry and alternative therapy.
  • Diagnostic-only policy – a lower-cost policy, which is designed to cover the cost of the initial consultation/diagnosis, including diagnostic tests (eg MRI, CT, PET scan).

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
        • Report focus
        • Executive Summary

            • The market
              • Standard forecast model predicts slow premium growth
                • Figure 1: Forecast of PMI gross earned premiums, at current prices – Fan chart, 2016-21
              • Corporate sector accounted for 75% of people covered in 2015, but only 56% of total premiums
                • Figure 2: PMI gross earned premiums, by sector, 2011-15
              • Uncertain economic outlook
                • Falling claims ratio indicates improved profitability…
                  • …but providers continue to face cost pressures
                    • NHS under increasing financial pressure
                      • More restrictive access to cancer drugs should boost interest in cancer cover
                        • Companies and brands
                          • Two brands dominate
                            • Figure 3: Market shares of top five PMI providers, by GWP, 2015
                          • Cost containment remains a priority
                            • Providers continue to innovate…
                              • …and invest in advertising
                                • The consumer
                                  • 14% of adult internet users in the UK have private health insurance
                                    • Figure 4: Ownership of PMI and related health products, August 2016
                                  • Joint and family policies are common
                                    • 39% of policyholders have opted for a higher excess or to co-pay…
                                      • While 37% receive a NCD
                                        • Figure 5: Policy understanding and prevalence of co-payment, NCD and lifestyle rewards, August 2016
                                      • 32% of policyholders express disappointment over the way a past claim was handled
                                        • Figure 6: Past claims experience, August 2016
                                      • 23% are planning to upgrade their cover within two years
                                        • Figure 7: Expected policy upgrades/downgrades, switching and cancellation, August 2016
                                      • Among the non-insured, 69% have never looked into taking out PMI…
                                        • …but 49% might consider taking out a policy in the future
                                          • Figure 8: Policy types the non-insured would consider taking out in the future, August 2016
                                        • Access to prompt treatment and new drugs and treatments are PMI’s key selling points
                                          • Figure 9: Most appealing policy benefits, according to existing customers and potential targets (top eight only), August 2016
                                        • 27% of people expect NHS services to decline over the next five years
                                          • What we think
                                          • Issues and Insights

                                            • Adapting to an ageing population
                                              • The facts
                                                • The implications
                                                  • The challenge of balancing choice and simplicity
                                                    • The facts
                                                      • The implications
                                                      • The Market – What You Need to Know

                                                        • Market achieved good growth in 2015, but unlikely to be repeated in 2016
                                                          • Providers fail to stem the steady erosion of personal subscribers
                                                            • Falling claims ratio indicates improved profitability
                                                              • Uncertain economic outlook
                                                                • NHS under increasing financial pressure
                                                                  • More restrictive access to cancer drugs should boost interest in cancer cover
                                                                  • Market Size and Forecast

                                                                    • Fall in subscribers halted in 2015…
                                                                      • …but it could be a temporary reprieve
                                                                        • Figure 10: Number of PMI subscribers and people covered, 2011-15
                                                                      • Premium income grew modestly in 2015
                                                                        • Figure 11: PMI gross earned premiums, 2011-15
                                                                      • Market forecast
                                                                        • Over the medium term, the market will struggle to achieve real-term growth
                                                                          • Figure 12: Forecast of PMI gross earned premiums, at current prices – Fan chart, 2016-21
                                                                          • Figure 13: Forecast of PMI gross earned premiums, at current and constant prices, 2016-21
                                                                        • Forecast methodology
                                                                        • Market Segmentation

                                                                          • In 2015 the number of corporate people covered grew to 3.95 million
                                                                            • Figure 14: Number of PMI subscribers and people covered, by sector, 2011-15
                                                                          • Health trust schemes remain a competitive threat to corporate PMI
                                                                            • The ongoing challenge of selling PMI to individuals
                                                                              • Personal sector accounted for 44% of total PMI premiums in 2015
                                                                                • Figure 15: PMI gross earned premiums, by sector, 2011-15
                                                                              • Rate of premium inflation may be unsustainable
                                                                                • Figure 16: Average PMI premium, by sector, 2006-15
                                                                            • Claims Performance

                                                                              • Claims ratio continues to move steadily lower
                                                                                • Figure 17: PMI claims amount incurred and claims ratio, by sector, 2011-15
                                                                              • Lack of competition among hospitals is an ongoing threat
                                                                              • Market Drivers

                                                                                • The macroeconomic environment is fairly benign, but there is much uncertainty ahead
                                                                                  • Figure 18: Key economic indicators, August 2016
                                                                                • Brexit has raised the threat of a slowdown, which could have a negative impact on the PMI market
                                                                                  • Moderate decline in NHS waiting time performance
                                                                                    • Figure 19: Number of NHS patients waiting for diagnostic tests and procedures and proportion who are waiting over six weeks (monthly basis) – England, January 2006 to July 2016
                                                                                  • …but NHS England is struggling to meet cancer waiting list targets
                                                                                    • Slowdown in NHS spending will put greater financial pressure on public health services
                                                                                      • Figure 20: NHS net expenditure in real terms, 2011/12-2019/20
                                                                                  • Regulatory and Legislative Changes

                                                                                    • Increases in IPT reduce product affordability
                                                                                      • Figure 21: Changes to the standard rate of IPT, 2011-16
                                                                                    • CMA’s lack of remedial action
                                                                                      • Launch of revamped CDF
                                                                                      • Companies and Brands – What You Need to Know

                                                                                        • A heavily concentrated market
                                                                                          • Providers remain focused on reducing costs…
                                                                                            • …while still investing in innovation…
                                                                                              • …and consumer advertising
                                                                                              • Market Share

                                                                                                • The market comprises merely a handful of underwriters
                                                                                                  • Figure 22: Top eight PMI providers, by GWP, 2011-15
                                                                                                • AXA PPP marginally narrows the gap on market leader, Bupa
                                                                                                  • Figure 23: Market shares of top five PMI providers, by GWP, 2015
                                                                                              • Competitive Strategies

                                                                                                • Market consolidation
                                                                                                  • Simplyhealth is the latest to withdraw from the market
                                                                                                    • Some differentiation but good ideas get replicated
                                                                                                      • Insurers strive to lower costs
                                                                                                        • Strategies to make PMI more accessible
                                                                                                          • Bupa
                                                                                                            • AXA PPP healthcare
                                                                                                              • Aviva Health
                                                                                                                • VitalityHealth
                                                                                                                  • Vitality and Aviva join forces
                                                                                                                    • WPA
                                                                                                                      • CS healthcare
                                                                                                                        • New innovation
                                                                                                                          • Cigna launches skin cancer diagnostic clinics in partnership with SkinHealth UK
                                                                                                                            • VitalityHealth partners with Apple Watch…
                                                                                                                              • …and launches health product for small businesses
                                                                                                                                • Aviva launches innovative 'top-up' health insurance to help make cancer cover affordable for all
                                                                                                                                  • AXA PPP launches new health and wellbeing platforms
                                                                                                                                  • Advertising and Marketing Activity

                                                                                                                                    • Total consumer adspend up by 20% in the year to July 2016
                                                                                                                                      • Figure 24: Top 12 advertisers of above-the line, online display and direct mail advertising expenditure on private healthcare insurance and related products, 2014/15-2015/16
                                                                                                                                    • Providers cut back on using direct mail
                                                                                                                                      • Figure 25: Proportional distribution of above-the line, online display and direct mail advertising expenditure on private healthcare insurance and related products, by media type, 2014/15-2015/16
                                                                                                                                    • The merits of using different media
                                                                                                                                      • Nielsen Ad Intel coverage
                                                                                                                                      • The Consumer – What You Need to Know

                                                                                                                                        • Joint and family policies are common
                                                                                                                                          • 39% of policyholders have opted for a higher excess or to co-pay
                                                                                                                                            • 23% are planning to upgrade their cover within two years
                                                                                                                                              • Among the non-insured, 69% have never looked into taking out PMI…
                                                                                                                                                • …but 49% might consider taking out a policy in the future
                                                                                                                                                  • Prompt treatment is the key benefit of PMI
                                                                                                                                                    • 27% of people expect NHS services to decline over the next five years
                                                                                                                                                    • Consumer Product Ownership

                                                                                                                                                      • 14% of UK adult internet users have private health insurance
                                                                                                                                                          • Figure 26: Ownership of PMI and related health products, August 2016
                                                                                                                                                        • Key demographics
                                                                                                                                                          • Joint and family policies are fairly prevalent
                                                                                                                                                              • Figure 27: People covered by policy, August 2016
                                                                                                                                                          • Policy Understanding and Claims Experience

                                                                                                                                                            • 15% of policyholders do not know what level of health cover they have
                                                                                                                                                              • Figure 28: Policy understanding and prevalence of co-payment, NCD and lifestyle rewards, August 2016
                                                                                                                                                            • 46% of under-35s say they have chosen a higher excess or to co-pay in the event of a claim
                                                                                                                                                              • Londoners are also more likely to go for these pricing options
                                                                                                                                                                • Less than two fifths of policyholders receive a NCD
                                                                                                                                                                  • The under-35s are much more likely to receive a NCD and rewards for healthy living
                                                                                                                                                                    • Around two thirds of customers will make a claim at some stage during the life of their policy
                                                                                                                                                                      • Figure 29: Past claims experience, August 2016
                                                                                                                                                                  • Expected Changes in Cover Levels and Switching Activity

                                                                                                                                                                    • A higher proportion of customers are planning to upgrade than downgrade cover
                                                                                                                                                                      • Figure 30: Expected policy upgrades/downgrades, switching and cancellation, August 2016
                                                                                                                                                                    • Just over a fifth of personal policyholders are planning to switch
                                                                                                                                                                      • Figure 31: Proportion of personal PMI policyholders who are planning to switch within next two years (rebased), August 2016
                                                                                                                                                                  • The Non-Insured – Attitudes toward Healthcare and Insurance

                                                                                                                                                                    • A significant minority of the non-insured lack confidence in the NHS
                                                                                                                                                                      • Figure 32: Agreement with statements about the NHS, private healthcare and health insurance, August 2016
                                                                                                                                                                    • Around three fifths appreciate the benefit of having private health insurance
                                                                                                                                                                      • CHAID analysis – Attitudes toward Healthcare and Insurance
                                                                                                                                                                        • Methodology
                                                                                                                                                                          • Parents under the age of 45 with a household income of £25,000+ are key targets
                                                                                                                                                                            • Figure 33: Agreement with statement ‘I’d consider paying to go private if it meant I’d get treated more quickly – CHAID – Tree output, August 2016
                                                                                                                                                                            • Figure 34: Agreement with statements about the NHS, private healthcare and health insurance – CHAID – Table output, August 2016
                                                                                                                                                                        • The Non-Insured – Future Consideration of Health Insurance

                                                                                                                                                                          • Half of all those without PMI would consider taking out a policy in the future
                                                                                                                                                                            • Figure 35: Policy types the non-insured would consider taking out in the future, August 2016
                                                                                                                                                                          • 8% would consider a policy that included a co-payment option
                                                                                                                                                                            • Twice as many people are interested in treatment-only than diagnostic-only policies
                                                                                                                                                                            • Most Appealing Policy Benefits

                                                                                                                                                                              • Speedy hospital admissions and referrals are the key selling points of PMI
                                                                                                                                                                                • Figure 36: Most appealing policy benefits, according to existing customers and potential targets, August 2016
                                                                                                                                                                              • Access to medicines and treatments not available on the NHS also makes PMI worth considering
                                                                                                                                                                                • Target the under-35s with alternative therapies, free gym membership and healthy-lifestyle rewards
                                                                                                                                                                                • Expectations Regarding the Future of the NHS

                                                                                                                                                                                  • More people expect NHS services to decline than improve over the next five years
                                                                                                                                                                                    • Figure 37: Expected change (or otherwise) in NHS services over the next five years, August 2016
                                                                                                                                                                                  • Potential PMI targets among the non-insured are even more negative in their predictions for the NHS
                                                                                                                                                                                    • Figure 38: Expected change (or otherwise) in NHS services over the next five years, by PMI policyholders and potential targets among the non-insured, August 2016
                                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                  • Abbreviations
                                                                                                                                                                                    • Consumer research methodology
                                                                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                                                                      • Total market forecast – best- and worst-case scenarios
                                                                                                                                                                                        • Figure 39: Forecast of total PMI gross earned premiums – best- and worst-case scenarios, at current prices, 2016-21
                                                                                                                                                                                      • Corporate sector forecast
                                                                                                                                                                                        • Figure 40: Forecast of corporate PMI gross earned premiums – Fan chart, 2016-21
                                                                                                                                                                                        • Figure 41: Forecast of corporate PMI premiums – best- and worst-case scenarios, at current prices, 2016-21
                                                                                                                                                                                      • Personal sector forecast
                                                                                                                                                                                        • Figure 42: Forecast of personal PMI gross earned premiums – Fan chart, 2016-21
                                                                                                                                                                                        • Figure 43: Forecast of personal PMI premiums – Best- and worst-case scenarios, at current prices, 2016-21
                                                                                                                                                                                      • Forecast methodology

                                                                                                                                                                                      Companies Covered

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

                                                                                                                                                                                      Private Medical Insurance - UK - October 2016

                                                                                                                                                                                      US $2,672.70 (Excl.Tax)