UK Private Medical Insurance 2007

Published by: Datamonitor

Published: Feb. 14, 2008 - 71 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

The UK PMI market grew in 2006 as subscriber numbers and average premiums increased

Premium income for UK private medical insurance grew to £3 billion in 2006 in GEP terms

PMI subscriber numbers increased in both sectors in 2006

Premium rates fell in the group sector and grew slowly in the individual sector in 2006

The individual sector is concerned with lowering costs to attract more policyholders

The group sector is concerned with developing wellness propositions to complement PMI offerings

Uptake of PMI is still relatively low in the population but peaks among wealthy individuals aged 45 to 54

Only around 12% of consumers have private medical insurance

Cost of cover is the main reason given by consumers for not wanting private medical insurance

Penetration rates are highest among wealthy consumers aged 45 to 54

BUPA and AXA dominate the market but the ranking of other players were influenced by consolidation in 2006

BUPA and AXA lead the PMI market, writing significantly more business than their nearest competitors

The ranking of the remainder of the top 10 was influenced by the merger and acquisition activity seen in 2005

The market is forecast to grow over the next five years although the increase in subscribers will be modest

Individual subscriber numbers are expected to fall but group subscribers will grow modestly

Premium rates inflation will be highest in the individual sector throughout the forecast period

The total PMI market will be worth £3.9 billion in GEP terms by 2012

Market Context

Introduction

The UK PMI market grew by 2.9% in 2006, driven by increases in subscribers and premiums

Premium income for UK private medical insurance grew to £3 billion in 2006 in GEP terms

PMI subscriber numbers increased in both sectors in 2006

Premium rates fell in the group sector and grew only slowly in the individual sector in 2006

The health insurance market grew its profit in 2006 and insurers bought less reinsurance

The underwriting profit increased for the UK health insurance market in 2006

UK health insurers ceded less premiums to the reinsurance industry in 2006

The individual and the group markets are dealing with different key challenges

The individual sector is concerned with lowering costs to attract more policyholders

Insurers can use a number of measures to lower the cost of premiums

Insurers can also introduce new cheaper policies specifically aimed at attracting new customers

The group sector is concerned with developing wellness propositions to complement PMI offerings

Customer Focus

Introduction

Uptake of PMI remains relatively low, with most consumers not interested in the product

Only around 12% of consumers have private medical insurance

Interest in the insurance remains low among those that currently do not have private medical insurance

Cost of cover is the main reason given by consumers for not wanting private medical insurance

Most consumers with PMI are between 45 and 54 in age and fall into the highest income brackets

Penetration rates are highest among consumers aged 45 to 54

Uptake of PMI is highest among wealthy consumers

PMI is mainly arranged via employers but distribution arrangements vary by age

A growing majority of consumers with PMI arrange it through their employer

Arrangements of PMI through employers peak among consumers aged 25-34 and falls thereafter

Employers pay for all or part of the majority of consumers' PMI

The telephone is the most popular method among those that do not arrange cover via employers

New distributors entered the market in 2007 in the form of Tesco and Boots

Tesco entered the PMI market in 2007 in partnership with AXA PPP

Boots launched a PMI product in April 2007 partnering with PruHealth

The entry of Tesco and Boots into the market could boost individual policy numbers

The top 10 PMI advertisers spent a total of £27m in 2006, focusing on direct mail advertising

Only three of the top 10 advertisers increased their advertising spend between 2005 and 2006

Direct mail was the most popular medium for advertising PMI in 2006, although some favor TV advertising

Competitive Dynamics

Introduction

BUPA and AXA remained market leaders in 2006, while M&A activity influenced the top 10

BUPA and AXA lead the PMI market, writing significantly more business than their nearest competitors

The ranking of the remainder of the top 10 was influenced by the merger and acquisition activity seen in 2005

BUPA, AXA and Norwich Union are the main players in the individual PMI market

The individual market is dominated by BUPA, AXA and Norwich Union

The rest of the top 10 are relatively small and only a few increased their market share in 2006

BUPA and AXA dominate group PMI, with other players remaining small in market share terms

BUPA and AXA were also the market leaders in the group PMI market in 2006

BUPA sold its hospitals in 2007 and announced new deals in the group market

AXA increased its market share by 0.7 percentage points in 2006 and is looking to grow further

Some smaller players in the group market achieved increases in GWP but remain small in market share terms

The Future Decoded

Introduction

Two forecast scenarios will be presented reflecting different views on the individual market

The main factors that influence the size of the PMI market are subscriber numbers and pricing strategies

Two scenarios will be presented with different assumptions about future subscriber numbers

Changes to NHS funding could influence future GWP growth but this has not been included in this forecast

In scenario one, the number of individual subscribers will fall in the forecast period

A range of factors influence GEP in scenario one

In scenario one, individual subscriber numbers are expected to fall but group subscribers will grow modestly

Premium rates inflation will be highest in the individual sector throughout the forecast period

The total PMI market will be worth £3.9 billion in GEP terms by 2012

In scenario two, an increase in individual subscribers will lead to stronger GEP growth

A range of assumptions influence the GEP forecast in scenario two

In scenario two, the number of individual subscribers are set to grow following the increase seen in 2006

Individual average premiums will rise slower as new cheaper policies become more popular

The PMI market is forecast to grow to a value of £4.2 billion by 2012 in scenario two

Appendix

Supplementary data

Definitions

Premium income measures

Earned premiums

Gross Premium

Net Premium

Written premiums

2005-06 definitions for lines of business

Accident & health

Medical expenses

HealthCare cash plan

Travel

Personal accident or sickness

Pre-2005 definitions of accident and health

Individual accident and health

Group accident and health

Competitor data

GWP versus GEP reporting

Home-Foreign, overseas and facultative reinsurance business

Advertising statistics

Ipsos MORI methodology and contacts

Sample design

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: UK private medical insurance GEP by sector, 2002-06 (£m)

Table 2: UK PMI subscribers and people covered by policy type, 2002-06

Table 3: UK PMI average policy premium by policy type, 2002-06 (£)

Table 4: UK health insurance market underwriting result, 2002-06 (£m)

Table 5: UK health reinsurance ceded and reinsurers' share of claims, 2002-06 (£m)

Table 6: PMI distribution by platform, 2007 (%)

Table 7: PMI distribution by platform for consumers who did not arrange their policies via employers, 2007

Table 8: Top 10 UK PMI advertisers, 2005-06 (£)

Table 9: Top 10 UK PMI advertisers' spend by medium, 2006

Table 10: Top 10 UK PMI insurers by market share, 2002-06

Table 11: Top 10 UK PMI insurers by premium income, 2002-06 (£000s)

Table 12: Top 10 UK individual PMI insurers by market share, 2002-06

Table 13: Top 10 UK individual PMI insurers by premium income, 2002-06 (£000s)

Table 14: Top 10 UK group PMI insurers by market share, 2002-06

Table 15: Top 10 UK group PMI insurers by premium income, 2002-06 (£000s)

Table 16: Factors affecting future PMI GEP, 2007e-12f, scenario one

Table 17: UK PMI subscriber forecast, scenario one, 2002-12f (000s)

Table 18: UK PMI average premium forecast, 2002-12f, scenario one (£)

Table 19: UK PMI GEP forecast, scenario one, 2002-12f (£m)

Table 20: Factors influencing the size of the UK PMI market, 2007-12, scenario two

Table 21: UK PMI subscriber forecasts, 2006-12, scenario two (000s)

Table 22: UK PMI average premium forecast, scenario two, 2002-12f (£)

Table 23: UK PMI GEP forecast, 2006-12, scenario two (£m)

Table 24: UK advertising expenditure by media, top 10 highest spending private medical insurers, 2005 (£)

List of Figures

Figure 1: GEP increased for both individual and group PMI in 2006 in the UK

Figure 2: The number of group and individual PMI subscribers increased in 2006 in the UK

Figure 3: The average premium rose for individual PMI policies but fell for group policies in 2006 in the UK

Figure 4: Both the underwriting result and NWP improved in 2006 for the UK health insurance market

Figure 5: Private medical insurance was the most popular type of health insurance in 2007

Figure 6: Most consumers without PMI are not interested in buying cover in the future

Figure 7: Many consumers without PMI think that this insurance is too expensive

Figure 8: Uptake of PMI is highest among consumers aged 45-54

Figure 9: PMI update rises in line with the household income of consumers

Figure 10: Most consumers with PMI arranged this cover via employers in 2007

Figure 11: The importance of employers in distributing PMI peaks among consumers aged 25-34

Figure 12: Employers paid all or part of the premiums for most consumers with PMI in 2007

Figure 13: The telephone was the most popular means of arranging PMI for those that did not arrange cover through their employer in 2007

Figure 14: BUPA was the largest PMI advertiser in 2006 by a significant margin

Figure 15: Most UK PMI advertisers focus their efforts on direct mail and television campaigns

Figure 16: BUPA and AXA dominated the UK PMI market in 2006

Figure 17: BUPA and AXA dominated the UK individual PMI market in 2006

Figure 18: BUPA and AXA dominated the group PMI market in 2006

Figure 19: The number of group PMI subscribers is forecast to grow in scenario one

Figure 20: Average premiums are forecast to grow fastest in the individual market in scenario one

Figure 21: The group PMI market is forecast to outgrow the individual market in scenario one

Figure 22: Both individual and group subscriber numbers are expected to grow in scenario two

Figure 23: The average premium growth forecast in scenario two for the individual line is lower than in scenario one

Figure 24: Individual PMI will outgrow group PMI in scenario two

Abstract

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