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Consumers and Health Insurance (PMI and HCPs) - UK - October 2018

“Conditions are tough in the UK private health insurance market, with affordability putting pressure on customer numbers and Brexit creating a more cautious corporate climate. Providers are rightly focussed on customer retention and controlling costs in order to maintain profitability.”

– Sarah Hitchcock, Senior Finance Analyst

This report examines the following issues:

  • PMI – the problem of affordability
  • HCPs – raise awareness of additional health benefits

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Table of contents

  1. Overview

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

          • The market
            • The health insurance market is mature and stable
              • Static premium income
                • Figure 1: Medical expenses insurance gross written premiums, 2016-19
              • Health insurers’ margins squeezed by rising medical inflation
                • NHS feeling the strain
                  • Average PMI premiums boosted by IPT rises
                    • Companies and brands
                      • A heavily consolidated market
                        • Figure 2: Top six providers’ estimated share of medical expenses insurance GWP (UK only), 2017
                      • Technology drives new innovation
                        • Insurers give greater focus to mental health
                          • The consumer
                            • Although much cheaper, cash plans have a lower take-up rate than PMI
                              • Figure 3: Ownership of health insurance, health cash plans and related products, August 2018
                            • Claims experience
                              • Both the PMI and HCP markets enjoy fairly high levels of customer loyalty
                                • Figure 4: Intentions to renew, switch or cancel health policy at next renewal, by cover type, August 2018
                              • Good levels of interest in health cover products…
                                • Figure 5: Interest in health insurance products by the non-insured, August 2018
                              • …but lack of affordability remains a key barrier to increasing take-up
                                • Figure 6: Amount can afford to pay in monthly premiums, by type of product interested in, August 2018
                              • Key selling points of PMI
                                • Figure 7: Most appealing health insurance benefits, August 2018
                              • Key selling points of a cash plan
                                • Figure 8: Most appealing HCP benefits, August 2018
                              • Level of public concern about the NHS
                                • Figure 9: Level of concern regarding various health-related issues, August 2018
                              • What we think
                              • Issues and Insights

                                • PMI – the problem of affordability
                                  • The facts
                                    • The implications
                                      • HCPs – raise awareness of additional health benefits
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • The health insurance market is mature and stable
                                              • The market will remain flat in 2018-19
                                                • Profit margins squeezed by rising cost pressures
                                                  • NHS under strain
                                                    • Product affordability compounded by IPT rises
                                                    • Market Size

                                                      • Number of policies in force
                                                        • Figure 10: Number of PMI policies and health cash plans in force, 2018
                                                      • Personal PMI sector in steady decline due to affordability constraints
                                                        • Premium income to stabilise, at least over the short term
                                                          • Figure 11: Medical expenses insurance gross written premiums, 2016-19
                                                      • Claims Incurred and Underwriting Result

                                                        • The value of net claims incurred was up 10% in 2017…
                                                          • Figure 12: Medical expenses insurance – claims incurred and other outgoings (ABI members only), 2016-17
                                                        • …impacting on profitability
                                                          • Figure 13: Medical expenses insurance – Claims and underwriting ratios (ABI members only), 2016-17
                                                      • Market Drivers

                                                        • Brexit uncertainty is bad for business
                                                            • Figure 14: Key economic indicators, August 2018
                                                          • Brexit may increase demand for international PMI
                                                            • More patients in the UK are waiting over 18 weeks for treatment
                                                              • NHS England managing to meet the 6-week wait deadline for diagnostic tests despite higher demand levels
                                                                • Figure 15: Number of NHS patients waiting for diagnostic tests and procedures, and proportion who are waiting over six weeks (monthly basis) – England, June 2008 to June 2018
                                                              • NHS England continues to fall short of cancer waiting list targets
                                                                • Extra NHS funding is not enough
                                                                  • Figure 16: NHS England – Total departmental expenditure limits in real terms, 2013/14-2020/21
                                                                • GP numbers decline while demand rises
                                                                  • Health cash plans compete with vision- and dental-only plans
                                                                    • Most adults pay towards their dental care
                                                                        • Figure 17: Cost of NHS dental treatment in England, 2010/11-2018/19
                                                                      • 70% of UK adults wear prescription eyewear
                                                                      • Regulatory and Legislative Changes

                                                                        • IDD deadline approaches
                                                                          • IPT increase pushes up cost of health insurance
                                                                            • Figure 18: Changes to the standard rate of IPT, 2011-17
                                                                        • Companies and Brands – What You Need to Know

                                                                          • The UK health insurance market is heavily consolidated
                                                                            • Strong competition between providers
                                                                              • Technology leveraged to offer new services and benefits
                                                                                • Insurers turn their attention to mental health
                                                                                  • Vitality ups the ante by boosting adspend
                                                                                  • Market Share

                                                                                    • Bupa and AXA PPP are the big heavyweights
                                                                                      • Figure 19: Providers’ medical expenses insurance GWP (UK only), 2016-17
                                                                                    • Top performers in 2017
                                                                                      • Significant others
                                                                                      • Competitive Strategies

                                                                                        • Market movements
                                                                                          • M&A activity continues
                                                                                            • Westfield Health acquires UK Healthcare
                                                                                              • Cash plan providers move into occupational health and digital healthcare services
                                                                                                • Other recent acquisitions
                                                                                                  • APRIL UK withdraws from PMI market
                                                                                                    • Aviva pulls out of IPMI market
                                                                                                      • AXA sells its whole-of-market healthcare intermediary
                                                                                                        • New distribution partnerships
                                                                                                          • Bupa and Waitrose establish an exclusive partnership
                                                                                                            • British Friendly offers cash plan to income protection policyholders
                                                                                                              • Industry innovation
                                                                                                                • Targeting the fit and active
                                                                                                                  • Simplyhealth launches Active Plan
                                                                                                                    • AXA PPP publishes guide to promote fitness at work
                                                                                                                      • Harnessing digital technology
                                                                                                                        • The Exeter adopts a digital approach with launch of new PMI policy Health+
                                                                                                                          • Greater focus on mental health
                                                                                                                            • Other new products and services
                                                                                                                              • Bupa launches prostate cancer checks and cancer self-referral service
                                                                                                                                • National Friendly launches PMI plan to tackle long GP waiting times
                                                                                                                                  • Health Shield offers health screening to entire workforce
                                                                                                                                  • Advertising and Marketing Activity

                                                                                                                                    • Vitality boosts adspend in an effort to engage…
                                                                                                                                      • Figure 20: Above-the line, online display and direct mail advertising expenditure on health cover products by selected providers, 2015/16-2017/18
                                                                                                                                    • …and adopts an integrated approach
                                                                                                                                      • Benenden Health – a new name, a new campaign
                                                                                                                                        • Nielsen Ad Intel coverage
                                                                                                                                        • The Consumer – What You Need to Know

                                                                                                                                          • 15% of UK adults have PMI, while 4% have a cash plan
                                                                                                                                            • Cancellation intentions among both PMI and HCP customers is very low
                                                                                                                                              • Expanding the market hampered by lack of affordability
                                                                                                                                                • Faster access to treatment is the top PMI selling point while money towards dental expenses is the most attractive benefit of a cash plan
                                                                                                                                                  • Many people are concerned about the health of the NHS
                                                                                                                                                  • Ownership of Medical Expenses Insurance

                                                                                                                                                    • 15% of UK adult internet users have private health insurance
                                                                                                                                                      • Figure 21: Ownership of health insurance, cash plans and related products, August 2018
                                                                                                                                                    • 3% have a condition-specific policy
                                                                                                                                                      • 5% have IPMI
                                                                                                                                                        • 4% have a cash plan
                                                                                                                                                          • Significant overlap between products
                                                                                                                                                            • Figure 22: Ownership of health insurance, cash plans and related products – Cross-analysis, August 2018
                                                                                                                                                          • Demographic profile of customers
                                                                                                                                                          • PMI Policyholders – Claims Experience and Renewal Intentions

                                                                                                                                                            • 50% of customers have made a claim on their health insurance
                                                                                                                                                              • Figure 23: Policyholder claims history, by cover type, August 2018
                                                                                                                                                            • Three times as many policyholders are expecting to upgrade or extend existing cover as downgrade
                                                                                                                                                              • Figure 24: Intentions to renew, switch or cancel health policy at next renewal, by cover type, August 2018
                                                                                                                                                            • Only 1% are expecting to cancel cover at their next renewal
                                                                                                                                                            • HCP holders – Claims Experience and Renewal Intentions

                                                                                                                                                              • 61% of HCP customers have made at least one claim within the past 12 months
                                                                                                                                                                • Figure 25: HCP subscriber claims history, August 2018
                                                                                                                                                              • 8% are planning to switch and just 2% to cancel cover altogether
                                                                                                                                                                • Figure 26: Intentions to renew, switch or cancel HCP at next renewal, August 2018
                                                                                                                                                            • The Non-insured and Interest in Health Cover Products

                                                                                                                                                              • Significant interest in health insurance products
                                                                                                                                                                • 5% are interested in getting a treatment-only policy…
                                                                                                                                                                  • …while 3% are keen on the concept of co-payment
                                                                                                                                                                    • Figure 27: Interest in health insurance products by the non-insured, August 2018
                                                                                                                                                                  • 11% are keen on health cash plans
                                                                                                                                                                    • Just 4% of those interested in health cover products can afford to pay £50 in monthly premiums
                                                                                                                                                                      • Figure 28: Amount can afford to pay in monthly premiums, by type of product interested in, August 2018
                                                                                                                                                                  • Most Appealing Product Benefits

                                                                                                                                                                    • Faster access to treatment is the main selling point of PMI
                                                                                                                                                                      • Figure 29: Most appealing health insurance benefits, by those who have cover and those interested in getting it, August 2018
                                                                                                                                                                    • Preferences differ between the sexes and across the age range
                                                                                                                                                                      • 72% of potential prospects find cash towards dental treatment appealing
                                                                                                                                                                        • Figure 30: Most appealing HCP benefits, by those who have a cash plan and those interested in getting one, August 2018
                                                                                                                                                                    • Concerns about the NHS, Health Costs and Getting Cover for a Pre-existing Condition

                                                                                                                                                                      • 64% are worried about waiting times to see a specialist
                                                                                                                                                                          • Figure 31: Level of concern regarding various health-related issues, August 2018
                                                                                                                                                                        • 54% are concerned about the cost of dental treatment
                                                                                                                                                                        • Appendix – Data Sources and Abbreviations

                                                                                                                                                                          • Abbreviations
                                                                                                                                                                            • Consumer research methodology

                                                                                                                                                                            Consumers and Health Insurance (PMI and HCPs) - UK - October 2018

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