Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The PMI market saw stellar growth in 2008 2
The UK PMI market grew again in 2008 2
Standard Life marketed heavily in 2008 2
Pru Health, AXA and Simplyhealth grew their market share in 2008 3
Pru Health's business grew by over 50% 3
AXA's PMI business added nearly £90m in premiums 3
Simplyhealth's market share grew to 2.1% 3
Total health insurance premium income will grow slowly in 2009 and 2010 before seeing steadier growth between 2011 and 2013 4
Slow growth is expected in 2009 and 2010 4
The group sector is expected to see slightly lower growth than the individual market in the short-term 4
Table of Contents 5
Table of tables 7
Market issues 8
Introduction 8
Health insurers can now help consumers with the cost of cancer drugs 8
NHS patients are now allowed to pay privately for additional drugs without forgoing their NHS care 8
A cancer top-up policy could be attractive to consumers who have been diagnosed with cancer or are conscious of contracting cancer 8
There is debate on the potential market size for cancer top-up policies 9
Retention activity is more important than ever 10
The previous recession appears to have taken a toll on the PMI market suggesting difficult times ahead 10
Interviewees are already feeling the effects of the recession 13
Maximizing retention rates is key to protecting revenue in the recession 13
Market context 14
Introduction 14
The PMI market saw stellar growth in 2008 14
The UK PMI market grew again in 2008 14
The group market drove subscriber growth for the second year running 16
The number of group subscribers grew by 6.1% in 2008 16
The total number of people covered by a PMI policy increased by 3.7% 16
Premium rates increased again 18
Average premium rates grew for both group and individual policies 18
Claims costs increased 18
Healthcare trust schemes pose a threat to the PMI market 20
There is significant potential to grow the penetration of PMI 22
Low overall coverage means PMI insurers could grow the market 22
The penetration rate of PMI varies little with age 23
Penetration peaks among wealthier consumers 24
Penetration of PMI is highest among the AB socio-economic group 26
Consumers over the age of 45 form the core market for individual health insurance 27
Marketing and distribution 29
Introduction 29
Standard Life marketed heavily in 2008 29
Standard Life marketed its EspritHealth product heavily in 2008 29
The top 10 PMI advertisers are focusing on direct mail advertising 31
A direct distribution strategy is the key way to target the individual market 33
Individual PMI policies are most likely to be arranged via an employer or direct with the insurer 33
A direct strategy is key to winning customers aged over 60 34
A phone-based sales strategy is an important means of acquiring the over 60s consumer 36
Individuals who do not receive PMI via their employers are most likely to buy a policy over the phone 36
Phone sales are particularly important in acquiring consumers aged over 60 38
It is essential to offer lower cost products in order to bring new customers into the market 39
Over 15% of non-PMI customers are interested in taking out a policy 39
PMI providers should be focusing on consumers aged between 18 and 29 40
Consumers in the mid to upper income bands are the core market for PMI 42
It is essential that PMI providers continue to bring low cost products to the market 44
Insurers should pay special attention to the idea that the NHS does not give adequate medical care when targeting the over 60s 46
Competitive dynamics 48
Introduction 48
Pru Health, AXA and Simplyhealth grew their market share in 2008 48
Pru Health's business grew by over 50% 48
AXA's PMI business added nearly £90m in premiums 48
Simplyhealth's market share grew to 2.1% 48
BUPA, AXA, Aviva, Standard Life and WPA continue to rank as the top five competitors 48
BUPA, AXA and Aviva controlled 81.4% of the market in 2008 48
Standard Life saw its market share contract by 0.3 percentage points 49
WPA grew its GEP by 2.7% while its market share decreased marginally in 2008 49
Legal & General's premiums fell as it has withdrawn from underwriting policies 49
Most of the top 10 health insurers play in the group and individual sectors 51
Future decoded 53
Introduction 53
Datamonitor expects the number of group and individual subscribers to fall in the short-term 53
The number of individual subscribers is expected to fall throughout the forecast period 53
The number of group subscribers is expected to fall in 2009 and 2010 due to the recession but resume growth between 2011 and 2013 53
Premium rates are expected to increase throughout the forecast period 55
Total health insurance premium income will grow slowly in 2009 and 2010 before seeing steadier growth between 2011 and 2013 57
Slow growth is expected in 2009 and 2010 57
The group sector is expected to see slightly lower growth than the individual market in the short-term 57
APPENDIX 60
Definitions 60
Further reading 60
Ask the analyst 60
Datamonitor consulting 60
Disclaimer 60
List of Tables
Table 1: Subscriber numbers and unemployment rate, 1985-2008 12
Table 2: UK PMI GEP by sector, 2004-08 (£m) 15
Table 3: Number of UK PMI subscribers and number of people covered by policy type, 2004-08 (000s) 18
Table 4: Estimated UK PMI average policy premium by policy type and total claims incurred, 2004-08 20
Table 5: Comparison of the number of group PMI subscribers and healthcare trust subscribers, 2004-08 (000s) 22
Table 6: Are you covered by a private medical insurance policy, either personally or jointly with a partner? Responses split by age (September 2008) 24
Table 7: Are you covered by a private medical insurance policy, either personally or jointly with a partner? Responses split by household income (September 2008) 25
Table 8: Are you covered by a private medical insurance policy, either personally or jointly with a partner? Responses split by socio-economic group (September 2008) 26
Table 9: Who pays the premiums on your private medical insurance policy? Responses split by age (September 2008) 28
Table 10: Marketing spend on PMI products, top 10 advertisers, 2008 31
Table 11: Marketing spend by media, top 10 PMI advertisers, 2008 (%) 32
Table 12: Which of these best describes how you arranged your PMI policy? (September 2008) 34
Table 13: Which of these best describes how you arranged your PMI policy? Responses split by age (September 2008) 36
Table 14: Which of these best describes how you arranged your PMI policy? (September 2008) 37
Table 15: Which of these best describes how you arranged your PMI policy? Responses split by age (September 2008) 39
Table 16: How interested would you be in buying a private medical insurance policy for yourself or your family? (September 2008) 40
Table 17: How interested would you be in buying a private medical insurance policy for yourself or your family? Split by age (September 2008) 42
Table 18: How interested would you be in buying a private medical insurance policy for yourself or your family? Responses split by household income (September 2008) 43
Table 19: Why do you not have private medical insurance? (Multiple responses allowed) (September 2008) 45
Table 20: Why do you not have private medical insurance? Responses split by age (September 2008) 47
Table 21: Gross earned premium and market share of the top 10 UK PMI insurers, 2007-08 51
Table 22: Forecast of the number of UK PMI subscribers, 2009-13f (000s) 55
Table 23: Forecast of the average PMI premium, 2009-13f (£) 57
Table 24: Forecast of UK PMI GEP, 2009-13f (£m) 59
List of Figures
Figure 1: The group and individual PMI markets grew again in 2008 2
Figure 2: WPA offers mycancerdrugs as part of its health-top up policy for an additional £4.20 per month 9
Figure 3: The previous recession appears to have taken its toll on the PMI market 11
Figure 4: The group and individual PMI markets grew again in 2008 15
Figure 5: The number of group PMI subscribers grew significantly in 2008 17
Figure 6: Average premium rates continue to rise in order to combat claims inflation 19
Figure 7: Healthcare trust schemes pose a threat to the PMI market 21
Figure 8: There is a significant potential to grow the PMI market 23
Figure 9: The penetration rate of PMI remains broadly the same across different age groups 24
Figure 10: Penetration rises significantly among higher income households 25
Figure 11: The penetration rate of PMI peaks among the AB socio-economic group 26
Figure 12: Consumers over the age of 45 form the core market for individual health insurance 27
Figure 13: Standard Life raised its stake in marketing spending in 2008 while Bupa still spent the most money 30
Figure 14: Bupa, HSA and WPA focused their marketing strategy on TV adverts in 2008 32
Figure 15: The direct channel is the best way to target the individual PMI market 33
Figure 16: A direct distribution strategy is key in acquiring consumers aged over 60 35
Figure 17: Nearly a fifth of policyholders arranged their policy over the phone 37
Figure 18: Phone sales are particularly important in acquiring consumers aged over 60 38
Figure 19: Over 15% of non-PMI customers are interested in buying a policy 40
Figure 20: Consumers aged between 18 and 29 are most interested in buying a private medical insurance policy 41
Figure 21: Mid to higher income consumers are most interested in buying PMI 43
Figure 22: PMI providers must continue to bring low cost products to the market in order to grow volume 45
Figure 23: A high proportion of consumers over 60 years old feel that the NHS gives adequate medical care 46
Figure 24: Pru Health, AXA and Simplyhealth gained market share in 2008 50
Figure 25: Most insurers have a presence in the individual and group markets 52
Figure 26: Group and individual subscriber numbers are expected to dip in 2009 and 2010 54
Figure 27: Average premiums are forecast to increase in both the group and individual markets 56
Figure 28: Datamonitor expects to see slow growth in the health insurance market in 2009 and 2010 before steadier growth resumes between 2011 and 2013 58