Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The UK PMI market grew in 2006 as subscriber numbers and average premiums increased 2
Premium income for UK private medical insurance grew to £3 billion in 2006 in GEP terms 2
PMI subscriber numbers increased in both sectors in 2006 2
Premium rates fell in the group sector and grew slowly in the individual sector in 2006 2
The individual sector is concerned with lowering costs to attract more policyholders 2
The group sector is concerned with developing wellness propositions to complement PMI offerings 3
Uptake of PMI is still relatively low in the population but peaks among wealthy individuals aged 45 to 54 3
Only around 12% of consumers have private medical insurance 3
Cost of cover is the main reason given by consumers for not wanting private medical insurance 3
Penetration rates are highest among wealthy consumers aged 45 to 54 3
BUPA and AXA dominate the market but the ranking of other players were influenced by consolidation in 2006 4
BUPA and AXA lead the PMI market, writing significantly more business than their nearest competitors 4
The ranking of the remainder of the top 10 was influenced by the merger and acquisition activity seen in 2005 4
The market is forecast to grow over the next five years although the increase in subscribers will be modest 4
Individual subscriber numbers are expected to fall but group subscribers will grow modestly 4
Premium rates inflation will be highest in the individual sector throughout the forecast period 4
The total PMI market will be worth £3.9 billion in GEP terms by 2012 4
Table of Contents 5
Table of figures 6
Table of tables 7
Market Context 8
Introduction 8
The UK PMI market grew by 2.9% in 2006, driven by increases in subscribers and premiums 8
Premium income for UK private medical insurance grew to £3 billion in 2006 in GEP terms 8
PMI subscriber numbers increased in both sectors in 2006 9
Premium rates fell in the group sector and grew only slowly in the individual sector in 2006 12
The health insurance market grew its profit in 2006 and insurers bought less reinsurance 13
The underwriting profit increased for the UK health insurance market in 2006 13
UK health insurers ceded less premiums to the reinsurance industry in 2006 15
The individual and the group markets are dealing with different key challenges 16
The individual sector is concerned with lowering costs to attract more policyholders 16
Insurers can use a number of measures to lower the cost of premiums 16
Insurers can also introduce new cheaper policies specifically aimed at attracting new customers 17
The group sector is concerned with developing wellness propositions to complement PMI offerings 17
Customer Focus 19
Introduction 19
Uptake of PMI remains relatively low, with most consumers not interested in the product 19
Only around 12% of consumers have private medical insurance 19
Interest in the insurance remains low among those that currently do not have private medical insurance 20
Cost of cover is the main reason given by consumers for not wanting private medical insurance 21
Most consumers with PMI are between 45 and 54 in age and fall into the highest income brackets 22
Penetration rates are highest among consumers aged 45 to 54 22
Uptake of PMI is highest among wealthy consumers 23
PMI is mainly arranged via employers but distribution arrangements vary by age 24
A growing majority of consumers with PMI arrange it through their employer 24
Arrangements of PMI through employers peak among consumers aged 25-34 and falls thereafter 25
Employers pay for all or part of the majority of consumers' PMI 27
The telephone is the most popular method among those that do not arrange cover via employers 28
New distributors entered the market in 2007 in the form of Tesco and Boots 29
Tesco entered the PMI market in 2007 in partnership with AXA PPP 29
Boots launched a PMI product in April 2007 partnering with PruHealth 29
The entry of Tesco and Boots into the market could boost individual policy numbers 30
The top 10 PMI advertisers spent a total of £27m in 2006, focusing on direct mail advertising 30
Only three of the top 10 advertisers increased their advertising spend between 2005 and 2006 30
Direct mail was the most popular medium for advertising PMI in 2006, although some favor TV advertising 32
Competitive Dynamics 35
Introduction 35
BUPA and AXA remained market leaders in 2006, while M&A activity influenced the top 10 35
BUPA and AXA lead the PMI market, writing significantly more business than their nearest competitors 35
The ranking of the remainder of the top 10 was influenced by the merger and acquisition activity seen in 2005 35
BUPA, AXA and Norwich Union are the main players in the individual PMI market 38
The individual market is dominated by BUPA, AXA and Norwich Union 38
The rest of the top 10 are relatively small and only a few increased their market share in 2006 39
BUPA and AXA dominate group PMI, with other players remaining small in market share terms 42
BUPA and AXA were also the market leaders in the group PMI market in 2006 42
BUPA sold its hospitals in 2007 and announced new deals in the group market 42
AXA increased its market share by 0.7 percentage points in 2006 and is looking to grow further 43
Some smaller players in the group market achieved increases in GWP but remain small in market share terms 43
The Future Decoded 47
Introduction 47
Two forecast scenarios will be presented reflecting different views on the individual market 47
The main factors that influence the size of the PMI market are subscriber numbers and pricing strategies 47
Two scenarios will be presented with different assumptions about future subscriber numbers 47
Changes to NHS funding could influence future GWP growth but this has not been included in this forecast 48
In scenario one, the number of individual subscribers will fall in the forecast period 48
A range of factors influence GEP in scenario one 48
In scenario one, individual subscriber numbers are expected to fall but group subscribers will grow modestly 49
Premium rates inflation will be highest in the individual sector throughout the forecast period 51
The total PMI market will be worth £3.9 billion in GEP terms by 2012 53
In scenario two, an increase in individual subscribers will lead to stronger GEP growth 55
A range of assumptions influence the GEP forecast in scenario two 55
In scenario two, the number of individual subscribers are set to grow following the increase seen in 2006 56
Individual average premiums will rise slower as new cheaper policies become more popular 58
The PMI market is forecast to grow to a value of £4.2 billion by 2012 in scenario two 60
Appendix 63
Supplementary data 63
Definitions 64
Premium income measures 64
Earned premiums 64
Gross Premium 64
Net Premium 64
Written premiums 64
2005-06 definitions for lines of business 64
Accident & health 64
Medical expenses 64
HealthCare cash plan 64
Travel 65
Personal accident or sickness 65
Pre-2005 definitions of accident and health 65
Individual accident and health 65
Group accident and health 65
Competitor data 66
GWP versus GEP reporting 66
Home-Foreign, overseas and facultative reinsurance business 66
Advertising statistics 66
Ipsos MORI methodology and contacts 66
Sample design 67
Further reading 67
Ask the analyst 68
Datamonitor consulting 68
Disclaimer 68
List of Tables
Table 1: UK private medical insurance GEP by sector, 2002-06 (£m) 9
Table 2: UK PMI subscribers and people covered by policy type, 2002-06 12
Table 3: UK PMI average policy premium by policy type, 2002-06 (£) 13
Table 4: UK health insurance market underwriting result, 2002-06 (£m) 15
Table 5: UK health reinsurance ceded and reinsurers' share of claims, 2002-06 (£m) 15
Table 6: PMI distribution by platform, 2007 (%) 26
Table 7: PMI distribution by platform for consumers who did not arrange their policies via employers, 2007 29
Table 8: Top 10 UK PMI advertisers, 2005-06 (£) 32
Table 9: Top 10 UK PMI advertisers' spend by medium, 2006 34
Table 10: Top 10 UK PMI insurers by market share, 2002-06 37
Table 11: Top 10 UK PMI insurers by premium income, 2002-06 (£000s) 38
Table 12: Top 10 UK individual PMI insurers by market share, 2002-06 41
Table 13: Top 10 UK individual PMI insurers by premium income, 2002-06 (£000s) 42
Table 14: Top 10 UK group PMI insurers by market share, 2002-06 45
Table 15: Top 10 UK group PMI insurers by premium income, 2002-06 (£000s) 46
Table 16: Factors affecting future PMI GEP, 2007e-12f, scenario one 49
Table 17: UK PMI subscriber forecast, scenario one, 2002-12f (000s) 51
Table 18: UK PMI average premium forecast, 2002-12f, scenario one (£) 53
Table 19: UK PMI GEP forecast, scenario one, 2002-12f (£m) 55
Table 20: Factors influencing the size of the UK PMI market, 2007-12, scenario two 56
Table 21: UK PMI subscriber forecasts, 2006-12, scenario two (000s) 58
Table 22: UK PMI average premium forecast, scenario two, 2002-12f (£) 60
Table 23: UK PMI GEP forecast, 2006-12, scenario two (£m) 62
Table 24: UK advertising expenditure by media, top 10 highest spending private medical insurers, 2005 (£) 63
List of Figures
Figure 1: GEP increased for both individual and group PMI in 2006 in the UK 9
Figure 2: The number of group and individual PMI subscribers increased in 2006 in the UK 11
Figure 3: The average premium rose for individual PMI policies but fell for group policies in 2006 in the UK 13
Figure 4: Both the underwriting result and NWP improved in 2006 for the UK health insurance market 14
Figure 5: Private medical insurance was the most popular type of health insurance in 2007 20
Figure 6: Most consumers without PMI are not interested in buying cover in the future 21
Figure 7: Many consumers without PMI think that this insurance is too expensive 22
Figure 8: Uptake of PMI is highest among consumers aged 45-54 23
Figure 9: PMI update rises in line with the household income of consumers 24
Figure 10: Most consumers with PMI arranged this cover via employers in 2007 25
Figure 11: The importance of employers in distributing PMI peaks among consumers aged 25-34 26
Figure 12: Employers paid all or part of the premiums for most consumers with PMI in 2007 27
Figure 13: The telephone was the most popular means of arranging PMI for those that did not arrange cover through their employer in 2007 28
Figure 14: BUPA was the largest PMI advertiser in 2006 by a significant margin 31
Figure 15: Most UK PMI advertisers focus their efforts on direct mail and television campaigns 33
Figure 16: BUPA and AXA dominated the UK PMI market in 2006 36
Figure 17: BUPA and AXA dominated the UK individual PMI market in 2006 40
Figure 18: BUPA and AXA dominated the group PMI market in 2006 44
Figure 19: The number of group PMI subscribers is forecast to grow in scenario one 50
Figure 20: Average premiums are forecast to grow fastest in the individual market in scenario one 52
Figure 21: The group PMI market is forecast to outgrow the individual market in scenario one 54
Figure 22: Both individual and group subscriber numbers are expected to grow in scenario two 57
Figure 23: The average premium growth forecast in scenario two for the individual line is lower than in scenario one 59
Figure 24: Individual PMI will outgrow group PMI in scenario two 61