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Private Medical Insurance - UK - November 2014

INTRODUCTION
Abbreviations
EXECUTIVE SUMMARY
The market
Standard model predicts consistent premium growth
Figure 1: Forecast of total PMI gross earned premiums, 2009-19
Market factors
Economic recovery
Slowing rate of premium inflation
Figure 2: Average PMI premium, by sector, 2003-13
Remedial actions of the Competition Markets Authority
The NHS spending gap
The NHS as a key feature of the 2015 general election campaign
Companies, products and innovations
A highly concentrated market
Figure 3: Top five providers’ market shares, based on subscription income, 2013
Product innovation
Brand promotion
The consumer
Ownership of private medical insurance
Figure 4: Consumer ownership of insurance or savings products for health needs, July 2014
Consumers’ assessment of their health
Figure 5: Consumer perceived state of health, July 2014
Consumer use of routine health services
Figure 6: Personal and family use of routine health services, July 2014
Consumer use of non-routine health services
Figure 7: Personal and family-use of non-routine health services
Consumer attitude towards private medical insurance
Figure 8: Consumer attitude towards Private Medical Insurance
Consumer satisfaction with the NHS
Figure 9: Consumer satisfaction with the NHS, July 2014
Consumer interest in additional health services
Figure 10: Consumer interest in paying for additional health services, July 2014
What we think
ISSUES AND INSIGHTS
The traditional PMI business model is challenged by changes to the NHS
The facts
The implications
The proliferation of health information is causing confusion for young consumers
The facts
The implications
Increasing prevalence of long-term conditions puts pressure on carers
The facts
The implications
Exposing consumers to private healthcare through cheaper alternative products first can encourage PMI sales later on
The facts
The implications
TREND APPLICATION
Trend: Guiding Choice
Trend: Prove It
Futures: Human
MARKET DRIVERS
Key points
The economic recovery is becoming more established…
…but wage growth remains stagnant…
…and the fall in unemployment can be linked to a marked increase in the numbers of self-employed
Figure 11: Proportional distribution of PMI subscribers, people covered and gross earned premiums, by sector, 2013
Figure 12: Number of PMI subscribers and people covered, by sector, 2009-13
Cost containment efforts are beginning to combat premium inflation
Figure 13: Average PMI premium, by sector, 2003-13
Lapse rates are falling
Figure 14: New business and lapse rates for UK PMI, 2009-13
Remedial action taken by the Competition Markets Authority will go some way towards reducing costs
The NHS is facing significant restrictions on spending…
Figure 15: NHS total managed expenditure 2010/11 – 2015/16
The 2015 general election boost to the NHS
COMPETITOR PRODUCTS
Key points
Private medical insurance
Figure 16: Ownership of insurance or savings products for health needs, July 2014
Figure 17: New business and lapse rates for Private Medical Insurance, 2009-13
Low cost health cash plans are strong competitors in the corporate market
Figure 18: New business and lapse rates for health cash plans, 2009-13
Figure 19: Number of health cash plan subscribers and average price paid, 2010-2013
New NHS services undermine key added value PMI options for individuals
…and the new Government Health and Work Service does the same for company subscribers
The relationship between private healthcare and the NHS is complicated
Competitive remedies to drive down costs for self-paying consumers
MARKET SWOT ANALYSIS
Figure 20: The PMI market – SWOT analysis, 2014
MARKET SIZE AND FORECAST
Key points
A positive outlook for the private healthcare market
Figure 21: New business and lapses rates for private medical insurance by sector, 2009-2013
Figure 22: Number of company paid and individual paid insured subscribers, 2009-2013
Market forecast
The value of the market should increase consistently
Figure 23: Forecast of total PMI gross earned premiums, 2009-19
Figure 24: Forecast of value of private medical insurance annual premiums, 2009-19
Increasing numbers of subscribers
Increasing average premium price
Market uncertainty
Forecast methodology
Fan chart explanation
CHANNELS TO MARKET
Key points
Overall influence of intermediaries decreases
Figure 25: Breakdown of PMI sales distribution, 2012 & 2013
Direct corporate sales are also increasing
Greater intermediary involvement could boost sales in the individual-paid market
The growing importance of digital channels
MARKET SHARE
Key points
A highly concentrated market dominated by top five providers
Figure 26: Top five providers’ market shares, based on subscription income, 2013
Bupa continues to dominate despite 3% drop in subscription income
Figure 27: PMI subscription income, 2009-13
PruHealth experience sees largest increase in income
COMPANIES AND PRODUCTS
Bupa
PMI market position
PMI subscription income
Description
Product range
Figure 28: Bupa’s Independent Policy Options
Financial performance
Figure 29: Key financial performance data for Bupa, 2012-13
Recent activity
AXA PPP healthcare
PMI subscription income
Description
Product range
Financial performance
Figure 30: Key Financial performance data for AXA, 2012-13
Recent activity
Aviva
PMI market position
PMI subscription income
Description
Product range
Financial performance
Figure 31: Key financial performance data for AVIVA, 2011-13
Recent activity
PruHealth
PMI market position
PMI subscription income
Description
Product range
Financial performance
Figure 32: Key Financial Information for Discovery, 2012-13
Recent activity
Simplyhealth
PMI market position
PMI subscription income
Description
Product range
Financial performance
Figure 33: Key financial information for Simplyhealth, 2012-2013
Recent activity
WHO’S INNOVATING?
Key points
The industry is moving beyond cost containment
Bupa has grown its mental health coverage
Aviva’s BacktoBetter improves musculoskeletal services
Developments in elderly care reflect changing UK demographics
BRAND COMMUNICATION AND PROMOTION
Key points
Advertising expenditure remains restricted for second year running
Figure 34: Advertising expenditure on private healthcare insurance
AXA PPP Healthcare and PruHealth increase advertising expenditure…
Figure 35: Top ten advertisers of private healthcare insurance in 2014
…whilst Bupa and Simplyhealth cut back
Provider preferences for different media drives variation in predominance of expenditure both overall…
A note on adspend
PRODUCT OWNERSHIP
Key points
Penetration of health-related insurance or savings products is low
Figure 36: Ownership of insurance or savings products for health needs, July 2014
Changes to the NHS may encourage greater interest in private cover
Private medical insurance is the most commonly owned health-related product…
...but this may change if providers cannot find ways of attracting a wider range of consumers.
Figure 37: Ownership of PMI by employment status, July 2014
CONSUMERS’ ASSESSMENT OF THEIR OVERALL HEALTH
Key points
Consumers predominantly perceive themselves as healthy
Figure 38: Perceived state of health, July 2014
Taking a different approach
Pressures on those in the middle take toll on health
Figure 39: Perceived state of health by age, July 2014
Building brand awareness amongst the young and healthy creates opportunities for the future
Growing health concerns mean that providers need to find a way of making cover affordable for those with the greatest health needs
Prioritising healthcare as an essential expense has placebo effect on perceived state of health
Figure 40: Consumer perceived state of health, by ownership of health-related insurance products, July 2014
USE OF ROUTINE HEALTH SERVICES
Key points
The demand for health-care services is high
Figure 41: Personal and family use of routine health services, July 2014
Personalisation of services can help consumers see the benefits of private medical insurance
Demand is highest for over-stretched GP services
Self-employment takes its toll on consumer health
Figure 42: Personal use of routine health services, by working status, July 2014
The effects of caring for dependent family members should not be overlooked
Figure 43: Percentage of consumers who have had a family member visit a GP in the past two years, by age, July 2014
Men are missing out on key preventative opportunities
Technology can increase interaction amongst hard-to-reach groups
Figure 44: Personal use of routine health services by age and gender, July 2014
USE OF NON-ROUTINE HEALTHCARE SERVICES
Key points
Time to change perceptions of alternative and specialist therapies
Figure 45: Personal use of non-routine healthcare services, July 2014
Shifting care out of hospitals
Figure 46: Personal use of routine health services, by personal use of non-routine health services, July 2014
Use of both routine and non-routine healthcare services negatively impacts perceptions of health
Figure 47: Consumer perceived state of health, by personal use of non-routine health services, July 2014
ATTITUDE TOWARDS PRIVATE MEDICAL INSURANCE
Key points
For consumers the existence of the NHS means that private medical insurance is a luxury and not a necessity
Figure 48: Attitudes towards private medical insurance, July 2014
General lack of understanding regarding different policies prevails amongst consumers
Figure 49: Ownership of insurance or savings products for health needs by attitude towards the statement ‘It is difficult to know which Private Medical Insurance policy to buy, July 2014
Figure 50: Ownership of insurance or savings products for health needs by agreement or disagreement with the statement ‘It is difficult to know which Private Medical Insurance policy to buy, July 2014
Lack of interaction with the healthcare system leads male consumers to value PMI less
Figure 51: Attitude towards the statement ‘private medical insurance is not good value for money’ by gender, July 2014
Demand for 24/7 services is driving down young consumers opinion of the NHS
Figure 52: Attitude towards PMI by age, July 2014
Ownership of private medical insurance has a positive impact on consumer attitude towards the product…
Figure 53: Agreement with the statement ‘Private Medical Insurance is not good value for money’, by PMI ownership, July 2014
Figure 54: Agreement with the statement ‘the NHS means that Private Medical insurance is just a luxury’, by PMI ownership, July 2014
Figure 55: Agreement with the statement ‘private medical insurance gives a standard of care that the NHS can’t match’, by PMI ownership, July 2014
...and towards providers
Figure 56: Agreement with the statement ‘I trust private medical insurers to treat me fairly,’ by PMI ownership, July 2014
CONSUMER SATISFACTION WITH THE NHS
Key points
Consumers are, by and large, highly satisfied with all aspects of NHS healthcare
Figure 57: Satisfaction with the NHS, July 2014
Opinions on GP services are polarising
NHS focus on older patients results in younger consumers missing out
Figure 58: Satisfaction with areas of NHS care by age, July 2014
Figure 59: Personal use of routine health services by age, July 2014
Flexibility will be a key selling point for younger people
Health-conscious consumers are the most likely to have a strong opinion on the NHS
Use of services drives up satisfaction
Figure 60: Personal use of routine and non-routine health services by satisfaction with NHS services, July 2014
Figure 61: Personal use of non-routine health services by attitude towards the statement ‘private medical insurance is not good value for money,’ July 2014
Acute and emergency care produces the highest levels of satisfaction
Figure 62: Personal use of non-routine health services, by satisfaction or dissatisfaction with access to diagnostic tests on the NHS, July 2014
Figure 63: Personal use of non-routine health services, by satisfaction or dissatisfaction with the availability of latest treatments and drugs, July 2014
Waiting lists are still a concern for people who have had surgery
Figure 64: Personal use of hospital surgery by satisfaction or dissatisfaction with NHS waiting lists
CONSUMER INTEREST IN ADDITIONAL HEALTH SERVICES
Key points
Lack of consumer interest in paying for services limits opportunities for innovation
Figure 65: Health services consumers would be willing to pay for, July 2014
Figure 66: Consumer interest in additional services by age and geographic location, July 2014
Demand for latest treatments risks pushing up premiums
Empowered consumers are more likely to be willing to pay for healthcare services
Figure 67: Consumer perceived state of health by interest in additional health services, July 2014
Figure 68: Personal use of routine health services by consumer interest in additional health services, July 2014
High-frequency, low-severity healthcare services provide the greatest opportunity for new business
Figure 69: Personal use of selected routine health services by consumer interest in additional health services, July 2014
Changing demographics create a need for more flexible family policies
Figure 70: Family use of non-routine health services by consumer interest in selected additional health services, July 2014
Positive experiences with private medical insurers lays the foundation for up-selling
Figure 71: Agreement with attitudinal statements about PMI Providers, by willingness to pay for additional services, July 2014
APPENDIX – MARKET SHARE AND FORECAST
Value
Figure 72: Best- and wroset-case forecast of the value of private medical insurance annual premiums, 2014-19

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