Table of Contents
Overview
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- What you need to know
- Products covered in this Report
- Report focus
Executive Summary
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- The market
- Standard forecast model predicts slow premium growth
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- 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
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- 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
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- 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
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- 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
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- 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
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- Figure 6: Past claims experience, August 2016
- 23% are planning to upgrade their cover within two years
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- 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
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- 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
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- 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
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- 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
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- 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
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- Fall in subscribers halted in 2015…
- …but it could be a temporary reprieve
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- Figure 10: Number of PMI subscribers and people covered, 2011-15
- Premium income grew modestly in 2015
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- Figure 11: PMI gross earned premiums, 2011-15
- Market forecast
- Over the medium term, the market will struggle to achieve real-term growth
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- Figure 12: Forecast of PMI gross earned premiums, at current prices – Fan chart, 2016-21
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- Figure 13: Forecast of PMI gross earned premiums, at current and constant prices, 2016-21
- Forecast methodology
Market Segmentation
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- In 2015 the number of corporate people covered grew to 3.95 million
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- 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
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- Figure 15: PMI gross earned premiums, by sector, 2011-15
- Rate of premium inflation may be unsustainable
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- Figure 16: Average PMI premium, by sector, 2006-15
Claims Performance
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- Claims ratio continues to move steadily lower
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- Figure 17: PMI claims amount incurred and claims ratio, by sector, 2011-15
- Lack of competition among hospitals is an ongoing threat
Market Drivers
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- The macroeconomic environment is fairly benign, but there is much uncertainty ahead
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- 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
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- 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
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- Figure 20: NHS net expenditure in real terms, 2011/12-2019/20
Regulatory and Legislative Changes
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- Increases in IPT reduce product affordability
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- 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
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- A heavily concentrated market
- Providers remain focused on reducing costs…
- …while still investing in innovation…
- …and consumer advertising
Market Share
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- The market comprises merely a handful of underwriters
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- Figure 22: Top eight PMI providers, by GWP, 2011-15
- AXA PPP marginally narrows the gap on market leader, Bupa
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- Figure 23: Market shares of top five PMI providers, by GWP, 2015
Competitive Strategies
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- 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
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- Total consumer adspend up by 20% in the year to July 2016
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- 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
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- 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
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- 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
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- 14% of UK adult internet users have private health insurance
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- Figure 26: Ownership of PMI and related health products, August 2016
- Key demographics
- Joint and family policies are fairly prevalent
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- Figure 27: People covered by policy, August 2016
Policy Understanding and Claims Experience
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- 15% of policyholders do not know what level of health cover they have
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- 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
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- Figure 29: Past claims experience, August 2016
Expected Changes in Cover Levels and Switching Activity
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- A higher proportion of customers are planning to upgrade than downgrade cover
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- Figure 30: Expected policy upgrades/downgrades, switching and cancellation, August 2016
- Just over a fifth of personal policyholders are planning to switch
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- 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
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- A significant minority of the non-insured lack confidence in the NHS
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- 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
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- 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
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- 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
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- Half of all those without PMI would consider taking out a policy in the future
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- 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
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- Speedy hospital admissions and referrals are the key selling points of PMI
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- 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
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- More people expect NHS services to decline than improve over the next five years
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- 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
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- 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
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market forecast – best- and worst-case scenarios
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- Figure 39: Forecast of total PMI gross earned premiums – best- and worst-case scenarios, at current prices, 2016-21
- Corporate sector forecast
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- 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
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- 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
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