UK Private Medical Insurance 2006

Content

• Chapter 1 Executive Summary
  • The slowdown in the PMI sector continued in 2005, however policyholder numbers showed slight signs of recovery
  • Premium income growth in the group PMI market increased in 2005, while the individual PMI market contracted for the first time
  • The individual sector declined in 2005, by 1.2 per cent, as lower premium rate increases slowed the decline in policyholder numbers, but were not enough to ensure overall market growth
  • Group sector GEP growth rose from 3.6 per cent in 2004, to 4.5 per cent in 2005, driven predominantly by rising subscriber numbers
  • Policyholder numbers showed signs of recovering in 2005
  • The fall in individual policyholder numbers slowed
  • 12 per cent of consumers have private medical cover
  • Penetration remained static in 2006, possibly declining by around 1 per cent
  • Expense is a major deterrant and insurers need to reassure consumers that they are getting good value
  • Uptake of PMI peaks in the 45-54 age bracket and policyholders are typically from the highest income brackets
  • Penetration is weak at both ends of the age scale
  • BUPA's market share grew to over 40 per cent in 2005, driven in particular by high growth in the group sector
  • The two leading insurers in the PMI market increased their share at the expense of smaller competitors
  • There was further consolidation in the individual sector in 2005, as conditions deteriorated and performances diverged
  • BUPA and AXA extended their individual PMI market share, while PruHealth also recorded high growth rates
  • AXA targeted older consumers, including those leaving corporate schemes
  • BUPA, Standard Life, RSA and Clinicare recorded significant premium income growth in the group PMI sector in 2005
  • The sector's second largest player, AXA PPP, also recorded premium income growth
  • Two forecasts are used to present a pessimistic and an optimistic view of future PMI GWP growth
  • Scenario 1 offers a pessimistic view of the market, in which both the group and the individual sectors struggle to reverse slowdown and contraction
  • Scenario 2 presents a more favorable outlook, in which group sector GWP growth improves and the individual sector stems the decline
• Chapter 2 Introduction
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• Chapter 3 Market Context
  • Introduction
  • The slowdown in the PMI sector continued in 2005, however policyholder numbers showed slight signs of recovery
  • Premium income growth in the group PMI market increased in 2005, while the individual PMI market contracted for the first time
  • The individual sector declined in 2005, by 1.2 per cent, as lower premium rate increases slowed the decline in policyholder numbers, but were not enough to ensure overall market growth
  • Group sector GEP growth rose from 3.6 per cent in 2004, to 4.5 per cent in 2005, driven predominantly by rising subscriber numbers
  • Policyholder numbers showed signs of recovering in 2005
  • The fall in individual policyholder numbers slowed
  • Growth in the group sector is driving the overall market
  • Premium inflation fell in 2005, especially in the individual sector
  • Premium rate increases in the individual sector fell to 2.7 per cent in 2005
  • Group sector price rises also declined slightly
  • The health insurance underwriting result improved in 2005, and the market remained in profit, largely as a result of a slowdown in claims cost increases
  • NWP growth outstripped growth in claims incurred
  • Increases in gross incurred claims slowed significantly in 2005
  • The individual sector continued to lose its fight against falling subscriber numbers in 2005, and price-based competition has started to increase
  • Providers have used product innovation to try and stem the fall in individual subscriber numbers, but this has failed to have an impact on policy numbers
  • Innovative new approaches to PMI products and underwriting have been tried in recent years
  • These innovative personal products did little to restore the market in 2005
  • Changes in the corporate sector seem to be taking policyholders away from the individual maket, making it harder for product innovation to have an impact
  • As individual policyholder numbers continue to fall, providers are increasingly competing for each others' business, leading to a rise in price-based competition
  • Profitable underwriting conditions are putting downward pressure on rates as insurers compete for a growing share of a shrinking market
  • The larger players are better placed to compete on price
  • Some recent examples of product innovation do exist
  • The group PMI market continues to be more buoyant than the individual sector and is being driven by a focus on the product's role as an absence management tool
  • The group sector is pulling away from the individual PMI market in premium income terms
  • Employees still view PMI as an important benefit, driving uptake among employers seeking to attract the best talent
  • Group providers are keen to emphasize the benefits of PMI as an absence management tool
  • Interest in workplace health is increasing, driving growth in the group market
  • Group PMI providers have increasingly emphasized the problems relating to sickness absence
  • Rehabilitation policies are now widespread
  • PMI providers have suggested to the Government that workplace health schemes should be awarded better fiscal terms, which would further increase penetration
  • Medical inflation and the performance of the NHS remain important concerns for all PMI providers
  • Claims costs are increasing, and the development of new cancer treatments are raising potential costs even further
  • Insurers are waiting to see what impact medical inflation will have on the pubic sector
  • If the NHS continues to use more ISTCs, PMI providers may have to do more to prove the value of cover
• Chapter 4 Customer Focus
  • Introduction
  • 12 per cent of consumers have private medical cover, however the majority remain apathetic towards the product
  • Penetration remained static in 2006, possibly declining by around 1 per cent
  • Consumer apathy is high; over 60 per cent of consumers without PMI have no interest in the product
  • Expense is a major deterrant and insurers need to reassure consumers that they are getting good value
  • Uptake of PMI peaks in the 45-54 age bracket and policyholders are typically from the highest income brackets
  • Penetration is weak at both ends of the age scale
  • 37 per cent of consumers with an income over 50,000 have PMI
  • Over half of PMI customers get their policy through their employer, however the distribution channels used change significantly with age
  • 56 per cent of people arranged their cover through an employer in 2006
  • Although clearly the most dominant channel, the popularity of employer distribution declines once consumers become older
  • Employers pay for, or contribute towards, 50 per cent of PMI premiums
  • Advertising expenditure rose in 2006, although BUPA and several other major players scaled back costs
  • PruHealth drove an increase in advertising expenditure
  • The highest-spending providers used TV to advertise their PMI services
• Chapter 5 Competitive Dynamics
  • Introduction
  • The PMI market remains consolidated, following many mergers and acquisitions in 2005
  • A number of smaller companies were bought out by larger rivals
  • BUPA's market share grew to over 40 per cent in 2005, driven in particular by high growth in the group sector
  • The two leading insurers in the PMI market increased their share at the expense of smaller competitors
  • BUPA's size and brand has helped it increase its presence further, particularly in the group market
  • AXA PPP grew by achieving significant growth in the individual sector
  • The remainder of the top 10 PMI providers saw their market share decline, with the exception of Clinicare
  • There was further consolidation in the individual sector in 2005, as conditions deteriorated and performances diverged
  • BUPA and AXA extended their individual PMI market share, while PruHealth also recorded high growth rates
  • AXA targeted older consumers, including those leaving corporate schemes
  • PruHealth grew substantially in its first full year in UK PMI
  • Four of the top 10 individual PMI providers lost market share in 2005
  • BUPA extended its market leading position in the group sector, increasing its share by 3.6 per cent
  • BUPA, Standard Life, RSA and Clinicare recorded significant premium income growth in the group PMI sector in 2005
  • The sector's second largest player, AXA PPP, also recorded premium income growth
  • Standard Life's has achieved strong premium income growth in the group market since 2001
  • Growth returned to Royal & SunAlliance's group account, following the sale of its healthcare business in 2004
  • WPA's 2005 performance in the group sector reversed a longer-term trend of decline
  • Norwich Union has been gradually growing its underweight group PMI book
  • Clinicare saw increased premium income in 2005, and its acquisition by Groupama in October of that year has created a new key player in the group PMI sector
  • Data profiles of the top five PMI players
• Chapter 6 The Future Decoded
  • Introduction
  • Two forecasts are used to present a pessimistic and an optimistic view of future PMI GWP growth
  • Scenario 1 offers a pessimistic view of the market, in which both the group and the individual sectors struggle to reverse slowdown and contraction
  • Scenario 2 presents a more favorable outlook, in which group sector GWP growth improves and the individual sector stems the decline
  • Scenario 1: The PMI market continues to record slow growth, driven by premium inflation, not by growth in subscriber numbers
  • The market struggles to achieve an increase in subscriber numbers, as customers continue to leave the individual sector
  • Individual policyholder numbers continue to decline between 2006 and 2011
  • Premium rate inflation continues to be higher in the individual sector than in the group sector
  • The group market is forecast to outperform the individual sector in terms of premium income between 2006 and 2011
  • Scenario 2: GEP growth picks up in the PMI market, as conditions improve in the group sector and the individual sector benefits from product development
  • Market conditions improve and subscriber numbers grow between 2006 and 2011
  • Growth in the group sector occurs as corporate schemes are extended to cover more people, and as product innovation has an impact on subscriber numbers in the individual sector
  • In Scenario 2, individual PMI premium inflation declines significantly during 2007 and 2008
  • A combination of better policyholder retention and a return to high premium inflation in 2009, lead the individual sector to stronger market growth
  • Scenario 1 is deemed to be more be likely than Scenario 2 for the future of the PMI market
• Chapter 7 Appendix
  • Supplementary data
  • GWP figures
  • Research methodology
  • Ipsos MORI methodology and contacts
  • Sample design
  • Timescale
  • Competitor data
  • GWP versus GEP reporting
  • Current readings
  • Future readings
  • Datamonitor's custom research capabilities
  • SPP writing team
• List of Tables
  • Table 1: PMI GEP by policy type, 2001-5
  • Table 2: Number of PMI subscribers and people covered by policy type, 2001-5
  • Table 3: PMI average premium, by policy type, 2001-5
  • Table 4: Health insurance market underwriting account, 2001-5
  • Table 5: Health reinsurance ceded and reinsurers' share of claims, 2001-5
  • Table 6: Advertising expenditure by media, top 10 highest spending private medical insurers, 2005
  • Table 7: The advertising expenditure of major players in the PMI market, by medium in 2004
  • Table 8: Market shares of the top 10 PMI providers, 2001-5
  • Table 9: Premium income of the top 10 PMI providers, 2001-5
  • Table 10: Market shares of the top 10 individual PMI providers, 2001-5
  • Table 11: Premium income of the top 10 individual PMI providers, 2001-5
  • Table 12: Market shares of the top 10 group PMI providers, 2001-5
  • Table 13: Premium income of the top 10 group PMI providers, 2001-5
  • Table 14: BUPA's PMI book, data profile, 2001-5
  • Table 15: AXA PPP's PMI loss and expense ratio, 2001-5
  • Table 16: Norwich Union's PMI loss and expense ratio, 2001-5
  • Table 17: Standard Life's PMI loss and expense ratio, 2001-5
  • Table 18: WPA's PMI loss and expense ratio, 2001-5
  • Table 19: Scenario 1: PMI policyholder numbers, 1997-2011f
  • Table 20: Scenario 1: Average PMI premium rates, 1997-2011f
  • Table 21: Scenario 1: PMI market GEP, 1997-2011
  • Table 22: Scenario 2: PMI policyholder numbers, 1997-2011
  • Table 23: Scenario 2: Average PMI premium costs, 1997-2011
  • Table 24: Scenario 2: PMI market GEP, 1997-2011
  • Table 25: PMI gross written premiums (GWP) by policy type, 2001-5
• List of Figures
  • Figure 1: Individual PMI market GEP declined in 2005
  • Figure 2: In both sectors of the PMI market, policyholder growth rates improved in 2005, but the individual sector continued to see a fall in subscribers
  • Figure 3: Average PMI premiums fell significantly in 2005, especially in the individual sector where high costs are deterring consumers
  • Figure 4: The health insurance market's profitability rose in 2005, as NWP increased at a greater rate than total outgoings
  • Figure 5: PruHealth's approach to PMI centers on rewarding policyholders for looking after their health
  • Figure 6: PMI product penetration was 12 per cent in 2006
  • Figure 7: Interest in buying medical insurance among consumers who did not have PMI cover was low in 2006
  • Figure 8: Over a third of consumers without PMI were principally deterred by the cost of the product in 2006
  • Figure 9: Uptake of PMI is highest among 44-54 year old consumers, 2006
  • Figure 10: Wealthier consumers are more likely to have PMI in 2006
  • Figure 11: Over half of existing PMI customers surveyed in 2006 had arranged their cover through their employer
  • Figure 12: Although clearly the most popular channel, the popularity of employer distribution declines once consumers become older
  • Figure 13: In 50 per cent of cases, employers paid all or part of the PMI policyholder's premium in 2006
  • Figure 14: In 2005 BUPA spent far more than other providers on advertising, however PruHealth's commitment to growing its business was reflected in its very high expenditure
  • Figure 15: The PMI market remained heavily consolidated in 2005, due to the strong presence of BUPA and AXA PPP in particular
  • Figure 16: BUPA , AXA and Norwich Union controlled a large proportion of the individual PMI market in 2005
  • Figure 27: BUPA dominated the group PMI sector in 2005, with a market share of over 40 per cent
  • Figure 18: Scenario 1: Key variables affecting the PMI market 2006-11
  • Figure 19: Scenario 1: Individual PMI policyholder numbers are forecast to continue to decrease between 2005 and 2011
  • Figure 20: Scenario 1: High average premium rate growth continues in the individual sector between 2005 and 2011
  • Figure 21: Scenario 1: The group PMI market pulls away from the ailing individual sector between 2006 and 2011
  • Figure 22: Scenario 2: Key variables affecting the PMI market 2006-11
  • Figure 23: Scenario 2: The total number of PMI subscribers increases between 2008 and 2011 as retention in the individual sector improves
  • Figure 24: Scenario 2: Individual premium inflation is reduced between 2006 and 2008, but high inflation returns from 2009
  • Figure 25: Scenario 2: The outlook for the individual sector improves due to more controlled premium inflation and better subscriber retention between 2006 and 2011
  • Figure 26: Datamonitor's core consulting capabilities