In the harsh economic climate, PMI is hanging tough in the face of increased NHS funding. Peter Carvill examines how the individual product fares compared with its corporate big brother Click here to download pdf (PDF, 2.8MB)
As the year slides into its eighth month it is the time when COVER conducts its annual survey of the individual private medical insurance (PMI) market.
The bottom-line assessment of the sector's performance is that sales have improved on last year. In fact, the numbers of subscribers has continued the increases seen over the last three years with numbers reaching 2002 levels or thereabouts since the annual declines of 2002-5. These figures, from the Association of British Insurers (ABI), show a slightly less rosy picture when examined in more detail: while the total number of subscribers has increased from 3.375 million to 3.401 million, the number of personal subscribers has declined with the corporate side making up the downfall.
This is reflected in the number of people covered. While the total number for that has increased from 5.879 million to 6.004 million, closer examination shows a decrease in personal subscribers once again compensated for by the corporate side. Between 2006 and 2007, the number covered under personal subscriptions fell from 1.691 million to 1.663 million; in contrast, the corporate side increased from 4.188 million to 4.341 million.
This trend does not, however, carry over into the number of gross earned premiums where the corporate and personal PMI sectors showed increases: corporate from £1,561m to £1,696m and personal from £1,509m to £1,545m, totalling £3,241m.
What this means, roughly, is that there have been fewer people covered under individual policies this year and that these consumers have been paying increased premiums since 2006. Using the ABI figures, an approximate calculation shows that the average premium for each person covered increased by £37 over the year, or around £3 a month. Whether this situation is good or bad for the market is debatable. What it is, however, is indicative of a sector where there has been little in the way of dramatic changes in its pricing structure.
Thick-skinned
Kelly Ostler-Coyle, spokesperson at the ABI, said in summation that the PMI market had remained resilient despite extensive investment in the NHS, adding: "The decline in individual PMI was more than offset by the increase in corporate PMI and the growing recognition of the benefit this brings to the working population.
"I would love to say that there's been a dramatic shift," says Dave Priestley, sales director at PruHealth, "but I don't know if there has been. The biggest news was probably the ABI figures that reported more positive signs in the overall levels of business. I don't know if the current economic climate will have any effect."
The ongoing squeeze in the credit markets and the reverberations on the finances of the average UK household were a recurring theme among those interviewed. Nigel Killick, marketing manager at National Deposit, said while it is less likely than before that current consumers will forgo PMI, the remaining question is: at what price does the product become untenable in times of economic hardship? "In the last downturn," continues Killick, "customers felt they had to cancel their policy if times got tough. Now that more people are used to having it, it's lower down the list of things to give up. It may mean people question the premiums they are paying and asking whether they are getting value for money."
Although the subject is about the individual end of the market, Killick puts forward a scenario where a decrease on group PMI may boost sales on the individual side: "A number of employers may look to reduce the costs of their PMI meaning there could be a number of individuals who find their corporate cover reduced. If it's a product that they're used to having or consider a necessity, they may look to take out an individual policy because it's something they're looking to keep."
Adds Priestley: "One of the big challenges right now is the economic climate. With the possibility of a recession, there's always the chance that this will have an impact on sales, not just for providers but intermediaries as well. All providers should be thinking quickly and seriously about how they can help manage their way through product offerings and, tactically, through marketing activity and working with brokers to get through the next six to 12 months."
A big talking point has been PruHealth which has a pioneering 'wellness' concept that actively rewards consumers for leading healthy lifestyles. With its adverts plastered across public transport and newspapers, the product has raised the profile of PMI in the eyes of British consumers.
However, the setup of the product is not without its critics.
Charlie MacEwan, director of communications at rival company WPA, syas: "I would say PruHealth has brought a lot of attention to the market but I don't believe vitality points are nearly as effective as shared responsibility."
Priestley offers an opposing view: "The straightforward concept of it is that if you're healthy, you should pay less for your health insurance. It's intuitively helpful for consumers."
What next?
As to where providers should be looking ahead, MacEwan says the most important development is not an aping of the PruHealth concept but in filling the gap in the treatment offered by the NHS, particularly around the contentious issue of the topping-up of free cancer care with drugs not available through local health authorities. "I think (the most important thing) is topping-up," says MacEwan, "We launched mycancerdrugs in April which made a difference and a contribution to change. We are in a position to make the most of a strategic change in UK healthcare. It's not a reaction to what anyone else has been doing; that's what we do - complement the gaps."
The WPA product, mycancerdrugs, is a policy that, according to its policy document, provides "each person on cover with up to £50,000 worth of benefit towards the cost of providing you with cancer drugs not available from the NHS."
However, it does not allow for experimental or unapproved drugs, and the literature maintains that all treatments must be prescribed by a specialist: "The drugs must be prescribed by a UK consultant in charge of your cancer treatment and given with curative intent." The product also applies across the lifetime of the person insured, not for each separate diagnosis of cancer.
Simple terms
MacEwan adds: "97% of the UK doesn't know what a cash plan is so what WPA is trying to do is offer an option that will appeal to some that population by doing what it says on the tin which is to top up NHS care."
For Priestley, the issue is that the 'wellness' concept, of prevention being better than cure, should remain at the forefront of people's priorities, something seemingly illustrated by the reception according to the PruHealth product: "What is relevant or important in the market is that health and wellness continues to be a key priority for the Government, and it is a key issue for the public at large. That really enforces our belief that helping people get healthy is an incredibly important aspiration and something that we want to continue to offer."
The final word comes from MacEwan who points out that despite the talk of product innovation and increased consumer consciousness regarding PMI, nearly 90% of the public have no medical insurance at all: "The one thing I was going to say is that a number of providers have been nailing their colours to the mast and pursuing certain types of customers. Some have gone for transfer business which is not particularly healthy since we should be attracting the 88% who don't have medical insurance."
