The small to medium enterprise (SME) market for private medical insurance (PMI) is unsustainable, PruHealth has said.
The health insurer noted that the SME PMI sector is contracting, while insurers and brokers continue to leave the market.
Dave Priestley, sales director at PruHealth, said: "The recent acquisition of Groupama by Simplyhealth further demonstrates the unsustainable economics of the SME PMI market.
"It's a tough, competitive market and it's heading in the wrong direction and at a time when the NHS is under pressure, the market should be growing."
He attributed this to the perceived value of the traditional PMI product not keeping pace with premium inflation, with insurers and brokers in this market continuing to undermine value rather than promote it.
He added that limited investment in genuine product development was a factor: "Yes, there is more product flexibility which is what today's customers demand and expect, but the traditional PMI product has simply not evolved to deliver more value for every £1 of premium invested.
"As a result, not enough new customers are attracted to the market resulting in a focus on switching existing customers. Consumers are less loyal and premiums are being driven up by lower margins and increased commission costs resulting in an unsustainable pattern of churn.
"We need to drive up the perceived value of PMI with SME customers whilst continually looking for new ways to keep premiums affordable and sustainable.
"The key to achieving this lies in genuine, value adding product differentiation, supported by high quality advice rather than basic price comparison. Smart differentiation creates significantly more customer value, raises the visibility of this value and helps to keep costs under control.
If the industry as a whole fails to move to this model, we should expect to see further consolidation within the PMI market."
