Private Medical Insurance - UK - July 2008

ISSUES IN THE MARKET
Key issues
 ABBREVIATIONS
INSIGHTS AND OPPORTUNITIES
Increasing PMI penetration for lower income groups
Don’t forget the premium end of the market…
…or small businesses for that matter
What about rewarding loyalty?
Splitting the focus
MARKET IN BRIEF
The PMI market has picked up since 2006…
Figure 1: Gross earned premiums (GEPs) for PMI, by sector, 2002-07
…with Bupa dominating, and smaller providers suffering
Figure 2: PMI provider rankings, by subscription income, 2005-07
Worries about the NHS continue to drive the market…
…but pricing pressure remains
Two main competing products
The corporate sector is heavily intermediated
Figure 3: Proportional distribution of PMI sales, by channel, 2005-07
Almost a fifth of consumers have PMI
Figure 4: Ownership of PMI and other related healthcare/protection products, June 2008
FAST FORWARD TRENDS
 TREND 1: GOLDEN BULLET
Enhancing medical treatment
Clearer understanding required?
 TREND 2: TRADING UP, TRADING DOWN, TRADING OVER
Weathering the storm
Tapping a new segment
INTERNAL MARKET ENVIRONMENT
Key points
The role of the NHS…indirectly promoting PMI
Figure 5: Top ten reasons given by PMI holders for taking out cover, 2007
Public spending on the NHS has increased significantly…
Figure 6: Total public spending on the NHS, 2002/03-2010/11
…with waiting times having come down as a result
Figure 7: Inpatient and outpatient waiting times (England), 2005-08
NHS health screening plans may also benefit the PMI industry…
…as might the government’s plans for polyclinics
The amount paid out on PMI claims has increased…
Figure 8: Claim amounts incurred and claims as a proportion of gross earned premiums (GEPs), 2002-07
…whilst premiums have only modestly increased
Figure 9: Average PMI premiums, by sector, 2002-07
EXTERNAL MARKET ENVIRONMENT
Key points
Greater personal wealth makes individual PMI more affordable…
Figure 10: Total personal disposable income (PDI) and consumer expenditure, 2003-12
…but tighter economic conditions may force people to cut back
Higher profits make corporate PMI more affordable
Figure 11: Gross operating surplus and balance of net primary incomes of private non-financial corporations, 2000-06
PMI is a highly prized employee benefit…
Figure 12: Top ten company benefits received and most highly valued by employees, February 2008
…and is the most common health benefit offered by employers
Don’t forget the smaller businesses…there’s a lot out there
Figure 13: Number of private sector enterprises, employees and turnover – UK, start 2006
Cancer incidence has increased…
Figure 14: Age-standardised cancer incidence and mortality rates, all cancers (excluding non-melanoma skin cancer), Great Britain, 1975-2005
…whilst smoking prevalence has declined
Figure 15: Prevalence of cigarette smoking, by gender, 1974-2006
Obesity is on the rise…
Figure 16: Number of obese men and women – England, 2003 and 2010
…whilst alcohol consumption has fallen
Figure 17: Weekly alcohol consumption level: percentage of people exceeding specified amounts, by age and gender, 1988-2006
COMPETITIVE CONTEXT
Key points
There are a range of healthcare funding options available
Figure 18: The main methods of obtaining healthcare treatment in the UK, 2007
Healthcare trust schemes have grown in popularity…
Figure 19: Number of subscribers and people covered by healthcare trust schemes, 2002-07
…although healthcare cash plans are more of a threat
Figure 20: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2002-06
STRENGTHS AND WEAKNESSES IN THE MARKET
 STRENGTHS
Lack of public faith in the NHS
Innovation in the market attracting younger customers
More affordable with modest increases in premiums
Strong and established brands
 WEAKNESSES
NHS improvements in waiting lists and treatments available
Economic concerns curtail both consumer and business spending
Lack of adviser interest in the personal sector
Tax disincentives for both companies and individuals
WHO’S INNOVATING?
Key points
Enhancing employee benefits
Capitalising on the health trend
Partnerships for profit
Other developments
Making PMI more affordable
TRADE PERSPECTIVE
Key drivers of the market
Growth areas for PMI
Boosting sales in the individual market…
…and the corporate market
Promoting innovation in the marketplace
The role of alternative healthcare products
The impact of switching
The role of intermediaries in the market
Challenges facing the PMI market at present
MARKET SIZE AND FORECAST
Key points
PMI is the most commonly held type of health insurance
Figure 21: Ownership of PMI and other related health/protection products, June 2008
The PMI market has picked up since 2005
Figure 22: Number of subscribers and people covered by PMI, by sector, 2002-07
Gross earned premiums have also steadily increased
Figure 23: Gross earned premiums (GEPs) for PMI, by sector, 2002-07
Growth in virgin business remains crucial
 MARKET FORECAST
The harmony of personal and public provision?
Long-term growth is expected in the personal sector…
Figure 24: Forecast for the personal PMI market, 2003-13
…with slightly lower growth anticipated in the corporate sector
Figure 25: Forecast for the corporate PMI market, 2003-13
Average premiums are expected to decline in the personal sector
Figure 26: Average annual premiums for PMI, Index, 2003-13
 FACTORS USED IN THE FORECAST
Personal market
Corporate market
MARKET SHARE
Key points
Bupa retains its very comfortable number one spot…
Figure 27: PMI provider rankings, by subscription income, 2005-07
…whilst smaller providers are quickly loosing ground
Figure 28: Illustration of PMI providers’ market shares, 2006 and 2007
A number of third-party administrators
COMPANIES AND PRODUCTS
Two key types of underwriting…
…and the matter of price versus policy coverage
Bupa
AXA PPP healthcare
Norwich Union Healthcare
Standard Life Healthcare
CIGNA HealthCare
WPA
Simplyhealth Group
PruHealth
BRAND COMMUNICATION AND PROMOTION
Key points
PMI accounts for a small proportion of financial services adspend…
Figure 29: Top ten categories of financial services advertising expenditure (sorted on 2007 data), 2004-07
…but it is the third-biggest category within general insurance
Figure 30: Top ten categories of general insurance  advertising expenditure (sorted on 2007 data), 2004-07
PruHealth has launched an aggressive advertising campaign
Figure 31: Top 20 PMI advertisres, by expenditure (sorted on 2007 data), 2004-07
TV and direct mail are the most popular forms of PMI advertising
Figure 32: PMI advertising expenditure, by media type, 2004-07
BRAND ELEMENTS
 BRAND MAP
Figure 33: Attitudes towards and usage of PMI brands, July 2008
 BUPA
What the brand is trying to achieve
What the consumer thinks
Figure 34: Attitudes towards the Bupa brand, July 2008
 AXA PPP HEALTHCARE
What the brand is trying to achieve
What the consumer thinks
Figure 35: Attitudes towards the AXA PPP healthcare brand, July 2008
 HSA
What the brand is trying to achieve
What the consumer thinks
Figure 36: Attitudes towards the HSA brand, July 2008
 BRAND QUALITIES OF PMI BRANDS
Bupa leads as the most authoritative, dependable and reassuring brand
Figure 37: Consumer usage of various PMI brands, July 2008
Boots appears well placed for its launch into the market
Figure 38: Consideration of various PMI brands, July 2008
Tesco PF has fairly high recent consumer usage
Figure 39: Consumer usage of various PMI brands, July 2008
The new entrants are perceived to be gaining some ground
Figure 40: Momentum of various PMI brands, July 2008
Bupa dominates on brand satisfaction
Figure 41: Brand satisfaction of various PMI brands, July 2008
Commitment to HSA is high; one of the most loyal
Figure 42: Commitment to various PMI brands, July 2008
 ROUND UP
CHANNELS TO MARKET
Key points
Sales of corporate PMI are heavily intermediated
Figure 43: Proportional distribution of PMI sales, by channel, 2005-07
The growing role of the internet…
…and of course, the retailers
THE CONSUMER: PRODUCT OWNERSHIP AND ATTITUDES TOWARDS HEALTHCARE
Key points
Almost two in ten consumers are covered by PMI
Figure 44: Ownership of PMI and other related healthcare/protection products, June 2008
Over half of PMI holders are covered by their employer
Figure 45: Ownership of PMI, by type of policy, June 2008
PMI is the domain of the middle age groups…
Figure 46: Ownership of PMI and other related health/protection products, by gender, age, socio-economic group, lifestage, newspaper readership and gross annual household income, June 2008
…and also of the more affluent
Superbugs are a major cause of concern…
Figure 47: Attitudes towards public and private healthcare, June 2008
…yet many are reluctant to pay for healthcare
Intermediaries have a role to play
Policy exclusions and medical disclosure are off-putting
Older consumers are most concerned about superbugs
Figure 48: Agreement with selected statements regarding public and private healthcare, by gender, age, socio-economic group, marital status and gross annual household income, June 2008
Wealthy consumers are more open to private healthcare…
Figure 49: Positive sentiment towards private healthcare, by socio-economic group, June 2008
…with DEs and young adults being the most apathetic
Married couples are also worth targeting
Healthcare protection product owners have greater NHS concerns
Figure 50: Attitudes towards healthcare, by ownership of health-related protection products, June 2008
Paid-for in taxes NHS treatment remains a barrier to some
THE CONSUMER: ATTITUDES OF POLICYHOLDERS AND APPEALING CHARACTERISTICS OF PMI
Key points
PMI holders seem to be fairly happy with their policy…
Figure 51: PMI holders’ views towards their policy, June 2008
…with very few having had claims rejected in the past…
…and switching provider also being relatively low
Corporate PMI is a benefit enjoyed more by men
Figure 52: PMI holders’ views towards their policy, by gender, age, socio-economic group and lifestage, June 2008
ABs are more likely to pay extra to have family members covered
Older customers are more likely to have successfully made a claim
ABs are happier with the service received from their provider…
…but are also more prone to switching
A clear explanation of what is covered is highly desirable…
Figure 53: Appealing characteristics of PMI, June 2008
…as is enhanced policy coverage
Are consumers becoming more practical?
PMI holders tend to look for a well-known provider
Figure 54: Appealing characteristics of PMI, by ownership of health-related protection products, June 2008
Coverage of pre-existing medical conditions is important…
…but the real challenge is increasing consumers’ interest
Women are more concerned with communication
Figure 55: Key reasons for choosing PMI, by gender, age, household income, tenure, ACORN category and age/socio-economic group, June 2008
Younger adults are more price sensitive…
…whilst Wealthy Achievers want cover for pre-existing conditions
ABC1 18-34-year-olds are heavily influenced by word of mouth
Larger households are less inclined to rule out PMI
Figure 56: Propensity to rule out PMI, by household size, June 2008
Some final thoughts on appealing features of PMI
THE CONSUMER: FURTHER ANALYSIS
Key points:
Consumer mindset groups identified
Potential PMI Targets
And/or, respondents that have any of the following opinions about private healthcare:
Happy Policyholders
PMI Rejecters
PMI Sceptics
NHS Critics
Happy Policyholders are likely to be high-income ABs
Figure 57: Profiles of various consumer mindset groups, by gender, age, socio-economic group, gross annual household income, household tenure, TV region, and age/socio-economic group, June 2008
Young Potential PMI Targets look for wider coverage…
Figure 58: Key reasons for choosing PMI among potential PMI targets, by gender, age, socio-economic group, marital status and lifestage, June 2008
…as do price-insensitive ABs…
…whilst third agers want cover for pre-existing conditions
How much do NHS concerns influence PMI uptake?
Figure 59: NHS concerns, by consumer mindset groups, June 2008
PMI holders tend to be more concerned with the NHS
Figure 60: PMI/cash plan ownership, by levels of concern in the NHS, June 2008
CHAID analysis
What is CHAID analysis?
CHAID analysis confirms ABs are the key target group for PMI
Figure 61: CHAID analysis on the PMI market, June 2008
APPENDIX – THE CONSUMER: PRODUCT OWNERSHIP AND ATTITUDES TOWARDS HEALTHCARE
Figure 62: Ownership of PMI and other related healthcare/protection products, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008
Figure 63: Attitudes towards public and private healthcare, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 1 of 2)
Figure 64: Attitudes towards public and private healthcare, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 2 of 2)
APPENDIX – THE CONSUMER: ATTITUDES OF POLICYHOLDERS AND APPEALING CHARACTERISTICS OF PMI
Figure 65: PMI holders’ views towards their policy, by gender, age, socio-economic group, lifestage, presence of children, working status, household income and media usage, June 2008, (Table 1 of 2)
Figure 66: PMI holders’ views towards their policy, by gender, age, socio-economic group, lifestage, presence of children, working status, household income and media usage, June 2008, (Table 2 of 2)
Figure 67: Appealing characteristics of PMI, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008 (Table 1 of 2)
Figure 68: Appealing characteristics of PMI, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008 (Table 2 of 2)
APPENDIX – THE CONSUMER: FURTHER ANALYSIS
Figure 69: Profiles of various consumer mindset groups, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008
Figure 70: Appealing characteristics of PMI for Potential PMI Targets, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 1 of 2)
Figure 71: Appealing characteristics of PMI for Potential PMI Targets, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education level, June 2008, (Table 2 of 2)