PruHealth has launched into the private medical insurance market with a product that links the cost of premiums to the efforts people make to look after their health. Could this approach help to boost sales in the sector?
Market views
Fiona Harris, BUPA
BUPA welcomes any new ideas that offer the consumer more choice and encourages them to take better care of their health. However, PruHealth's approach may discourage many people who would like to actively improve their health but also need to claim for treatment on their private medical insurance policy.
Policyholders that need to claim on their PruHealth cover – and if that claim exceeds the annual premium – could see the amount they pay the following year increase quite significantly, depending on the level of cover originally taken out. Policyholders may also be penalised if they are a high-level claimant, even if they are working to improve their health. People buy health cover expecting to claim if they fall ill, whether it's for something simple or complex.
Also, it can be quite difficult to improve your blood pressure or cholesterol levels, especially if you are already working hard to maintain your fitness. By putting in a fairly conservative claim, it could wipe off all the good points you'd earned by going to the gym or having a flu jab. Claiming for treatment, such as investigation for early diagnosis of knee joint pain may be just what you need to stay healthy.
Overall, this new approach seems complex to use and, although well constructed, may not be putting the consumer first. People should be able to expect a straightforward private medical insurance policy that delivers what it promises. In our experience, most people buy PMI to access good quality treatment at a time and place of their choice.
Adrian Norris, Mellon
PruHealth's new product could go a long way to revitalise a private medical insurance industry that is looking increasingly moribund in the face of a rapidly improving NHS. Particularly as the debate continues over whether private insurance is worth the cost, now there is an increasing option to pick and mix public and private care.
Many older individual purchasers, for instance, currently make the rational choice that they are better off doing all they can to stay healthy while keeping their money safely invested until they get ill. With PruHealth's new product their only major additional sacrifice is one large initial payment to ensure that any need for private medicine will never be beyond their means.
As a negative, there is the inevitable question as to whether the sums add up. For a start, being fit doesn't necessarily mean being healthy. 'Sports medicine' is a growing business, mostly funded by insurance and providing treatment to the amateur sportsman. Orthopaedics, rather than heart disease or cancer makes up by far the largest category of claims for UK private medicine.
If PruHealth do convert people from bad to good risks then their entry into the market will be good for everyone. If, however, they only attract people who are already healthy, the effect may be to polarise the private medical market into serving only the people who have the least need for it. Competition will win out over insurance and for every healthy person attracted an unhealthy one may be driven out.
Roger Hymas, Health Care Navigator
The PMI industry , particularly the individual sector, desperately needs younger, fitter people to balance out its increasingly older, sicker risk profile. The launch of PruHealth into the market tackles this issue head on and they should be credited for this.
However, the flaw in the plan is that most young, self-employed people do not have the spare money to invest in a plan, nor do they see health insurance as high on their priority list of 'must haves'. What they're really worried about is their pension. And this is where Prudential should have stuck to its original plan and introduced a PMI plan with an integral savings account.
Its South African joint venture partners and the partners of the South Africans in the US know that the next big thing is consumer directed health plans (CDHP). CDHP's include a very large deductible, such as a high excess of £1,000, with a navigation component to help the purchaser use their own cash to locate appropriate, good value health care.
This means that where the NHS offers an increasingly viable treatment option, people would use it. Over the years the excess on the policy would have to be increased continuously, while the premiums would decline. All the unspent premiums would build up to create a health care pension, which could then be used how the policyholder deems necessary.
Dermot Cox, CareHealth
PruHealth's new offering fails the test of simplicity and transparency. It offers two policies, three hospital networks, five excess levels, plus four levels of policy discounts relating to an array of objective and subjective healthy lifestyle indicators.
The premiums for a 50-year-old healthy male would start at around £1,000 per year. This is based on a very healthy and active lifestyle such as a non-smoker, regular gym sessions five times a week and coming in at the correct weight.
Based on this criteria, the applicant would qualify for a 100% rebate on their premiums in year two, paying only the health inflation increase and age-related increases.
However, there is no way of knowing what this will be, but estimating it to be around 5%, this means the premiums would be only £50 a year. This seems too good to be true or even sustainable.
There probably is a market for medical insurance underwritten on an individual basis, but this would require periodic medicals carried out by a health professional. This should be feasible and can easily be arranged, but can also be costly and time consuming.
