Table of Contents
Introduction and Abbreviations
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- The competitive ground is conditioned by level fees
- Report contents
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- The ageing population will bring about new sales opportunities for PMI providers
- Targeting ABC1 18-34s will lead to increased sales among younger consumers
- The addition of complementary treatments will increase the appeal of PMI to certain consumers
- A financially restricted NHS cannot compete in certain areas
- A no claims bonus may be applied exclusively to higher premium products
- Heading towards a more transparent healthcare market
Executive Summary
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- The UK’s healthcare market is changing
- Subscription figures point to a listless market…
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- Figure 1: Number of PMI subscriptions, company versus individual, 1994-2005
- …but GEP increase for a fifth successive year
- Annual inflation increases premiums
- BUPA is the largest PMI provider
- An ageing population opens new doors for providers
- The NHS Improvement Plan embraces independent suppliers
- The levelling of hospital fees will change the UK healthcare market
- The balance of payments rises to £629 million in 2004
- Competition markets are slow running
- PruHealth entered the market in 2004
- Penetration of PMI stands at 15%
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- Figure 2: Ownership of PMI and other insurances, July 2005
- A future in partnership with the NHS
Market Factors
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- Market prologue
- The psychology of PMI
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- Figure 3: Consumer attitudes towards PMI, September 2005
- The NHS Improvement Plan
- Preferred provider networks
- Competing with an improved NHS
- The major political parties look favourably on treatment from the private sector
- The ageing population should be seen as an opportunity
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- Figure 4: Expectation of life at birth, by selected ages, 1981-2002
- The changing demographic will put pressure on the NHS
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- Figure 5: Population growth projections, by age group, 2003 and 2028
- Government expenditure on the NHS increases
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- Figure 6: NHS expenditure (net), 1996/97-2005/06
- Emergency and continuing healthcare delivered at home
- UK public finance expenditure on health was 7.7% of GDP in 2003
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- Figure 7: Total expenditure on health, as a percentage of GDP, selected years, 1980-2003
- Private health insurance contributes significantly to certain healthcare markets
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- Figure 8: Selected countries, by proportion of public, private health insurance, privately funded and out-of-pocket health expenditure, 2000
- The concentration of practising physicians per 1,000 people in the UK has increased from 1.3 in 1980 to 2.2 in 2003
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- Figure 9: Practising physicians, concentration per 1,000 of population, 1980-2003
- The corporate rate of return stood at 13.3% in Q1 2005
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- Figure 10: Average annual net rates of return for private non-financial companies, 1993-2005
- 12.1% of the workforce is self-employed
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- Figure 11: Number of self-employed workers, 1993-2009
- The number of four to 17 week referrals rises
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- Figure 12: NHS waiting times, all specialities, GP written referrals (England), 2002/03-2004/05
- Consultant demand appears to be highest among patients in the 15-44 age group
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- Figure 13: NHS finished consultant episodes, by patient age, April 2003-March 2004
Market Size
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- The market remains sluggish
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- Figure 14: Total PMI subscriptions and the number of people covered, 2000-05
- PMI finds shelter in business
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- Figure 15: PMI subscriptions, by company and individual purchase, 1994-2005
- Small-group PMI
- Obstacles to increased corporate sales
- Customer retention
- The corporate to individual ratio stands at roughly two to one
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- Figure 16: Company to individual ratio, number of subscriptions, 1994-2005
- The average premium has risen by 27% since 2000
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- Figure 17: PMI GEP and average premium per subscriber, 2000-05
- The market is estimated to reach a combined GEP of £3.02 billion in 2005
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- Figure 18: GEP by sector, 2000-05
- Households spent an average of £1.50 per week on medical insurance
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- Figure 19: Average annual household expenditure, medical insurance and other insurances premiums, 2003/04
- International PMI
- International PMI – providers
- International PMI – regulation
Claims Management
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- Medical inflation
- Standardisation of treatment fees
- The balance of payments rose to £629 million in 2004
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- Figure 20: PMI claims incurred versus gross premiums, 2000-04
- The annual percentage change in gross claims exceeded that of gross premiums in 2004
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- Figure 21: Annual percentage change in gross premiums and claims incurred, 2000-04
- A more stable customer base would be beneficial to PMI providers
Competition Products
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- The NHS will treat patients faster
- Increased consumer awareness about health issues
- PMI subscribers are targets for competition product providers
- The progression of self-pay
- The healthcare cash plan market is flat
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- Figure 22: Healthcare cash plan market, by number of subscribers, 1999-2004
- Critical illness cover sales are on a downward trend
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- Figure 23: New sales of individual critical illness policies, 2000-04
- New IP sales have declined since 2002
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- Figure 24: New sales of income protection policies, 2000-04
Product Development
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- Full-premium PMI inclusions
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- Figure 25: Conditions usually covered by full-premium PMI cover, August 2005
- Entry points to owning PMI
- Menu-based pricing empowers purchasers
- Complementary and alternative private medicine
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- Figure 26: Proportion of consumers who consulted on complaints suffered in the last 12 months, 1999 and 2004
- Annual product amendments
- Operating in an increasingly 'connected' healthcare market
- Quality versus quantity
Key Players
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- BUPA is the established leader
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- Figure 27: Estimated market share of the leading PMI providers, by PMI premium income, 2004
- The British United Provident Association (BUPA)
- AXA PPP healthcare
- Norwich Union Healthcare (Aviva)
- Standard Life Healthcare
- FirstAssist
Distribution
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- Depolarisation will impact sales of health insurance
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- Figure 28: The PMI distribution network, August 2005
- Direct sales account for 73% of individual PMI distribution
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- Figure 29: Distribution of individual PMI policies by sales division, 2004
- Individual PMI intermediary sales
- Three-quarters of corporate sales are through intermediaries
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- Figure 30: Distribution of corporate PMI policies by sales division, 2004
- The impact of the Internet on PMI distribution
Advertising and Promotion
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- PruHealth enters the fray
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- Figure 31: Leading private healthcare insurance advertisers, 2004
- PMI advertising expenditure has risen by £12 million
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- Figure 32: Distribution of total advertising expenditure on private healthcare insurance, by outlet type, 2004
Consumer Financial Activity
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- Consumer confidence remains weak but prospects look more promising
- Using bancassurance, PMI sales could be improved
- Relationship with the main financial services providers (MFSP)
- High levels of activity from June 2005 onwards
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- Figure 33: Savings, investment, borrowing and debt repayment – consumers’ expected activity, March 2004-June 2005
- Younger respondents looking to refresh their financial affairs
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- Figure 34: Expected financial activity by socio-demographic and income groups, June 2005 and average for the last 14 quarters
- More activity than a year ago
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- Figure 35: Leading financial activities planned in the next 6 months, June 2004-June 2005
- Housing indicators pick up sharply
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- Figure 36: Intended mortgage and property purchase activity, June 2003-June 2005
- HSBC gains ground in terms of MFSPs
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- Figure 37: Leading main financial services providers: market shares, June 2004-June 2005
- Bank of Scotland will gain life and pensions business, Nationwide BS should be strong in savings
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- Figure 38: Saving, investment and lending, market sizes by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), June 2005
- The Scottish banks will have the most active customer base
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- Figure 39: Activity levels of main financial providers’ customer bases, June 2005
The Consumer
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- Penetration of PMI stands at 15%
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- Figure 40: Ownership of PMI and health insurances, by gender, July 2005
- Respondents aged 35-44 were most likely to hold corporate PMI
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- Figure 41: PMI ownership, by gender, age, socio-economic group and marital status, July 2005
- Implications
- Third age lifestages were most likely to own individual PMI
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- Figure 42: PMI ownership, by lifestage, working status, gross annual household income and TV region, July 2005
- Implications
- Special discounts may be offered to Internet users
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- Figure 43: PMI ownership, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, July 2005
- Implications
- Branch networks could become major distributors of PMI
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- Figure 44: Top financial products held by PMI subscribers, July 2005
- Some 38% of respondents said that they would seriously consider using PMI
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- Figure 45: Agreement with statements regarding private healthcare, the NHS and PMI, July 2005
- Implications
- Positive feeling towards PMI decreases with age
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- Figure 46: Agreement with statements regarding private healthcare, the NHS and PMI, by gender, age, socio-economic group and marital status, July 2005
- Implications
- ABC1 18-34s would seriously consider using PMI
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- Figure 47: Agreement with statements regarding private healthcare, the NHS and PMI, by lifestage, working status, gross annual household income and age/socio-economic group, July 2005
- Implications
- Broadsheets are an efficient means of reaching certain potential subscribers
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- Figure 48: Agreement with statements regarding private healthcare, the NHS and PMI, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, July 2005
- Implications
Consumer Attitudes and Targeting Opportunities
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- Some 39% of consumers said that medical insurance is too expensive
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- Figure 49: Agreement with statements regarding medical insurance, July 2005
- Preference for a high quality medical service declines with age
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- Figure 50: Agreement with statements regarding medical insurance, by gender, age and socio-economic group, July 2005
- Implications
- People in retirement are low-priority targets
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- Figure 51: Agreement with statements regarding medical insurance, by marital status, lifestage, working status and gross annual household income, July 2005
- Implications
- ABC1 18-34s were most likely to value a high quality service
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- Figure 52: Agreement with statements regarding medical insurance, by age/socio-economic group, TV region, tenure and ACORN category, July 2005
- Implications
- Broadsheet readers favour choice
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- Figure 53: Agreement with statements regarding medical insurance, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, July 2005
- Implications
- Waiting times are still a major issue for consumers
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- Figure 54: Factors which would encourage a new policy purchase or the extension of an existing policy, July 2005
- Overseas cover
- Incorporating the no claims bonus concept
- A good reputation is an essential ingredient
- Younger people are most likely to value shorter waiting times
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- Figure 55: Factors which would encourage a new policy purchase or the extension of an existing policy, by gender, age and socio-economic group, July 2005
- Implications
- Policies may evolve to be more focused on treatments delivered in the home
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- Figure 56: Factors which would encourage a new policy purchase or the extension of an existing policy, by marital status, lifestage, working status and gross annual household income, July 2005
- Implications
- Mortgagors are more likely to value the promise of shorter waiting times
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- Figure 57: Factors which would encourage a new policy purchase or the extension of an existing policy, by age/socio-economic group, TV region, tenure and ACORN category, July 2005
- Implications
- Provider websites now offer enhanced services
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- Figure 58: Factors which would encourage a new policy purchase or the extension of an existing policy, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, July 2005
- Implications
- PMI ownership typologies
- Any PMI
- Lapsed PMI users
- Any alternative cover
- No cover
- Lapsed PMI users favour needs-based healthcare
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- Figure 59: Consumer typologies by attitudes towards certain statements, July 2005
- Implications
- Customers that hold a PMI policy were most likely to find incentives appealing
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- Figure 60: Consumer typologies by incentive to extend or arrange a policy, July 2005
- Implications
- Lapsed PMI users were more likely to be aged 45-54
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- Figure 61: Consumer typologies, by gender, age, socio-economic group, TV region and working status, July 2005
- Cluster analysis
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- Figure 62: Medical insurance cluster groups, July 2005
- Consumers aged 25-34 are hot targets for PMI providers
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- Figure 63: Medical insurance cluster groups, by gender, age and socio-economic group, July 2005
- Consumers desire a high quality service
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- Figure 64: Cluster groups by selected statements regarding medical insurance, July 2005
- Implications
- Shorter waiting times and receiving a no claims bonus are key incentives
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- Figure 65: Number of reasons to extend or take up PMI by selected incentives, July 2005
- Implications
- The under-35s are most likely to have five or more reasons that would influence the take-up of cover
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- Figure 66: Number of reasons to arrange cover, by gender, age, socio-economic group and marital status, July 2005
- Implications
Industry Views
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- Market development
- Product development
- NHS Improvement Plan
- Advertising and promotion expenditure
- Internet distribution
- Intermediary distribution
- Direct distribution
- Market Size
- PMI subscription rates
The Future
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- Opportunities arising from the development of the NHS
- New performance indicators
- Private medicine is meeting the future need
- Expatriate market activity
- Corporate business opportunities
- The long-term value of the NHS to taxpayers
- Switch resources to develop higher volume individual products
Forecast
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- Subscriptions will reach 4.1 million by 2010
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- Figure 67: Forecast of PMI subscriptions, 2005-10
- Corporate premiums will increase by 20%
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- Figure 68: Forecast of gross earned premiums, 2005-10
- Factors used in the forecast
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