Health Cash Plans and Private Medical Insurance - UK - July 2010

ISSUES IN THE MARKET
Key issues
Market definitions
Abbreviations
FUTURE OPPORTUNITIES
Helping to create a healthy and happy workforce
PMI as a legacy
MARKET IN BRIEF
PMI subscriber numbers decline by 5% during 2009
Figure 1: Number of subscribers and people covered by PMI, by sector, 2003-10
Health cash plan contributors fall by more than 5% during 2009
Figure 2: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2003-10
Rising medical costs present a major headache for health insurers
NHS creates challenges and opportunities for health insurers
IPT increase could lead to increased interest in healthcare trusts
Bupa dominates the PMI market
Figure 3: PMI provider market shares, by subscription income, 2009
Simplyhealth is the major player in the health cash plan market
Economic conditions reflected in recent product development
Intermediaries see their share of market increase
A quarter of adults have some type of healthcare cover
Figure 4: Types of insurance or savings have for health needs, April 2010
Benefit preferences differ between existing and non-plan holders
Figure 5: Cash plan benefit preferences – all adults and existing plan holders, April 2010
Consumers are broadly supportive of the NHS
Figure 6: Attitudes towards healthcare and healthcare cover, April 2010
INTERNAL MARKET ENVIRONMENT
Key points
NHS spending has increased by more than 60% since 2003/04...
Figure 7: Total public spending on the NHS, 2003/04-2010/11
...but NHS budget is likely to face increased pressure
Waiting list times will be placed under scrutiny
Figure 8: Inpatient waiting times (England), 2007-10
Figure 9: Outpatient waiting times, referral (England), 2007-10
Growth in cancer rates creates a challenge for both the NHS and PMI providers
Figure 10: Age-standardised (European) incidence and mortality rates, all cancers (excluding non-melanoma skin cancer), Great Britain 1975-2008
Funding cancer drugs evokes an emotive response
PMI claims costs on an upward trend
Figure 11: Value of total PMI claims and as a proportion of GEP, 2002-09
Providing sustainable PMI products
Premiums growing faster in the personal sector
Figure 12: Average PMI premiums, by corporate and personal sectors, 2002-09
HCP claims fall as contribution income falls
Figure 13: Amount of HCP cash benefits paid and benefits paid as a percentage of contribution income earned, 2002-09
BROADER MARKET ENVIRONMENT
Key points
A more cautious approach to expenditure
Figure 14: Agreement with the statement ‘I spend money more carefully than I used to’, 2005-09
PMI forms an important part of employee benefit packages
Figure 15: Proportion on employers offering particular benefits as core, March 2010
Employers increasingly looking for ROI
Figure 16: Trends in absence levels, 1999-2009
IPT increase is likely to impact the corporate PMI market
The argument for tax relief
Solvency II could have impact for some cash plan providers
A lack of trust remains a major sticking point
COMPETITIVE CONTEXT
Key points
The NHS – a national treasure
NHS to face growing budgetary pressures
Private healthcare in the NHS
Self-insured medical expenses schemes are expected to grow
Figure 17: Number of subscribers and people covered by healthcare trust schemes, 2002-09
5% of adults have money set aside for medical expenses
STRENGTHS AND WEAKNESSES IN THE MARKET
Figure 18: Strengths and weaknesses in the health insurance market, 2010
WHO’S INNOVATING?
Key points
Affordable health insurance
Filling in the gaps
Combining PMI and health cash plans
Flexibility and affordability
Taking health insurance online
Lowering premiums through restricting treatment choice
Cancer – a focus for product development
Are health incentive schemes taking a back seat?
Reducing the impact of IPT
TRADE PERSPECTIVE
Economic uncertainty creates a challenge for health insurers
Insurers also face challenge from rising medical costs
Changes to the NHS could create opportunities for innovation
Product development and innovation
The danger of a price war in the cash plan market
Cash plan opportunities and challenges
Intense competition in the broker market leads to an increase in switching activity
Online sales channels have limited appeal
MARKET SIZE
Key points
Recession leads to a 5% decline in PMI subscribers
Figure 19: Number of subscribers and people covered by PMI, by sector, 2003-10
Challenging conditions expected to persist into 2010
Corporate PMI premiums fall by 3% during 2009
Figure 20: Gross earned premiums (GEP) for PMI, by sector, 2002-10
Health cash plan market declines by more than 5% in 2009
Figure 21: Number of healthcare cash plan subscribers, people covered and contribution income earned, 2003-10
 MARKET FORECAST
Subscriber numbers expected to increase by 5% over the next five years
Figure 22: Forecast for number of subscribers and people covered by PMI, BY sector 2004-15
Premiums will continue on an upward trend
Figure 23: Gross earned premiums (GEP) for PMI, by sector 2004-15
Health cash plan market likely to experience subdued growth
Figure 24: Forecast for number of healthcare cash plan subscribers, people covered and contribution income earned, 2004-15
MARKET SHARE
Key points
Bupa dominates the PMI market…
Figure 25: PMI provider market shares, by subscription income, 2009
Figure 26: Subscription income of the top ten PMI providers, 2005-09
…and Simplyhealth is the largest provider of HCPs
Figure 27: HCP market share, by contribution income, 2005-09
COMPANIES AND PRODUCTS
 MAJOR PLAYERS
Aviva
AXA PPP healthcare
Bupa
PruHealth
Simplyhealth
Standard Life Healthcare
CHANNELS TO MARKET
Key points
Corporate market relies heavily on intermediaries
Figure 28: Proportional distribution of PMI sales, by sales channel, 2005-09
Direct channels account for more than two thirds of personal PMI
Aggregator usage likely to increase
HCPs are mainly sold through direct channels
Figure 29: Proportional distribution of HCP sales distribution, 2008 and 2009
BRAND COMMUNICATION AND PROMOTION
Key points
PMI adspend falls but not as steeply as anticipated
Figure 30: Private medical insurance adspend, 2007-09
Bupa tops the advertiser list and accounts for 35% of sector adspend
Figure 31: Top 15 advertisers of PMI, by expenditure, 2007-09
Product launches and rebrands boost adspend in 2009
Direct mail and TV account for two thirds of PMI adspend
Figure 32: PMI adspend, by media type, 2007-09
THE CONSUMER – PRODUCT OWNERSHIP
Key points
Note on consumer research
A quarter of adults have some type of health cover
Figure 33: Health insurance ownership, April 2010
Ownership peaks among 45-54-year-olds
Figure 34: PMI and health cash plan ownership, by age, April 2010
Health insurance ownership is linked to household income
Figure 35: PMI and health cash plan ownership, by household income, April 2010
A fifth of cash plan owners also have PMI
Figure 36: Cross-analysis of health insurance product ownership, April 2010
Around 5% of people have more than one type of health cover
Figure 37: Repertoire of health insurance ownership, April 2010
Figure 38: Types of healthcare cover owned, 2009
Most people have comprehensive healthcare policies
Figure 39: Conditions/treatments included in healthcare cover, 2009
THE CONSUMER – HEALTH CASH PLAN BENEFITS
Key points
Cash plan holders have different benefit priorities than wider population
Figure 40: Cash plan benefit preferences – all adults and existing plan holders, April 2010
Scope to improve cash plan benefit awareness
Dental benefits have the widest appeal
Cash plan benefit preference differs with age
Figure 41: Most popular cash plan benefits, by demographics, April 2010
Health cash plans as a budgeting tool
Health cash plans as a PMI add-on
Figure 42: Cash plan benefit preferences, by health insurance ownership, April 2010
THE CONSUMER – ATTITUDES TOWARDS HEALTHCARE AND HEALTHCARE COVER
Key points
There is broad support for the work of the NHS
Figure 43: Attitudes towards healthcare and healthcare cover, April 2010
Over-65s are among the biggest supporters of the NHS
Figure 44: Most popular attitudes towards healthcare and healthcare cover, by demographics, April 2010
Support for the NHS does not prevent people from opting for private care
Higher earners are more likely to worry about small print and exclusions
Figure 45: Further attitudes towards healthcare and healthcare cover, by demographics, April 2010
Individual PMI holders are less positive about the NHS
Figure 46: Attitudes towards healthcare and healthcare cover, by most popular types of health insurance owned, April 2010
The self-insured are more likely to be concerned about small print
Figure 47: Attitudes towards healthcare and healthcare cover, by next most popular types ofhealth insurance owned, April 2010
 TARGET GROUPS
Figure 48: Healthcare cover, target groups, April 2010
APPENDIX – THE CONSUMER – PRODUCT OWNERSHIP
Figure 49: Most popular types of health insurance owned, by demographics, April 2010
Figure 50: Next most popular types of health insurance owned, by demographics, April 2010
APPENDIX – THE CONSUMER– HEALTH CASH PLAN BENEFITS
Figure 51: Most popular cash plan benefits, by demographics, April 2010
Figure 52: Next most popular cash plan benefits, by demographics, April 2010
Figure 53: Other cash plan benefits, by demographics, April 2010
APPENDIX – THE CONSUMER – ATTITUDES TOWARDS HEALTHCARE AND HEALTHCARE COVER
Figure 54: Most popular attitudes towards healthcare and healthcare cover, by demographics, April 2010
Figure 55: Next most popular attitudes towards healthcare and healthcare cover, by demographics, April 2010
Figure 57: Attitudes towards healthcare and healthcare cover, by target groups, April 2010
Figure 58: Types of insurance or savings have for health needs, by target groups, April 2010