UK Private Medical Insurance 2009

Table of Contents

OVERVIEW

• Catalyst
• Summary

EXECUTIVE SUMMARY

• The PMI market saw stellar growth in 2008
  • The UK PMI market grew again in 2008
  • Standard Life marketed heavily in 2008

• Pru Health, AXA and Simplyhealth grew their market share in 2008
  • Pru Health' s business grew by over 50%
  • AXA' s PMI business added nearly £90m in premiums
  • Simplyhealth' s market share grew to 2.1%

• Total health insurance premium income will grow slowly in 2009 and 2010 before seeing steadier growth between 2011 and 2013
  • Slow growth is expected in 2009 and 2010
  • The group sector is expected to see slightly lower growth than the individual market in the short-term

MARKET ISSUES

• Introduction
• Health insurers can now help consumers with the cost of cancer drugs
  • NHS patients are now allowed to pay privately for additional drugs without forgoing their NHS care
  • A cancer top-up policy could be attractive to consumers who have been diagnosed with cancer or are conscious of contracting cancer
  • There is debate on the potential market size for cancer top-up policies

• Retention activity is more important than ever
  • The previous recession appears to have taken a toll on the PMI market suggesting difficult times ahead
  • Interviewees are already feeling the effects of the recession
  • Maximizing retention rates is key to protecting revenue in the recession

MARKET CONTEXT

• Introduction
• The PMI market saw stellar growth in 2008
  • The UK PMI market grew again in 2008

• The group market drove subscriber growth for the second year running
  • The number of group subscribers grew by 6.1% in 2008
  • The total number of people covered by a PMI policy increased by 3.7%

• Premium rates increased again
  • Average premium rates grew for both group and individual policies
  • Claims costs increased
  • Healthcare trust schemes pose a threat to the PMI market

• There is significant potential to grow the penetration of PMI
  • Low overall coverage means PMI insurers could grow the market
  • The penetration rate of PMI varies little with age
  • Penetration peaks among wealthier consumers
  • Penetration of PMI is highest among the AB socio-economic group
  • Consumers over the age of 45 form the core market for individual health insurance

MARKETING AND DISTRIBUTION

• Introduction
• Standard Life marketed heavily in 2008
  • Standard Life marketed its EspritHealth product heavily in 2008
  • The top 10 PMI advertisers are focusing on direct mail advertising

• A direct distribution strategy is the key way to target the individual market
  • Individual PMI policies are most likely to be arranged via an employer or direct with the insurer
  • A direct strategy is key to winning customers aged over 60

• A phone-based sales strategy is an important means of acquiring the over 60s consumer
  • Individuals who do not receive PMI via their employers are most likely to buy a policy over the phone
  • Phone sales are particularly important in acquiring consumers aged over 60

• It is essential to offer lower cost products in order to bring new customers into the market
  • Over 15% of non-PMI customers are interested in taking out a policy
  • PMI providers should be focusing on consumers aged between 18 and 29
  • Consumers in the mid to upper income bands are the core market for PMI
  • It is essential that PMI providers continue to bring low cost products to the market
  • Insurers should pay special attention to the idea that the NHS does not give adequate medical care when targeting the over 60s

COMPETITIVE DYNAMICS

• Introduction
• Pru Health, AXA and Simplyhealth grew their market share in 2008
  • Pru Health' s business grew by over 50%
  • AXA' s PMI business added nearly £90m in premiums
  • Simplyhealth' s market share grew to 2.1%

• BUPA, AXA, Aviva, Standard Life and WPA continue to rank as the top five competitors
  • BUPA, AXA and Aviva controlled 81.4% of the market in 2008
  • Standard Life saw its market share contract by 0.3 percentage points
  • WPA grew its GEP by 2.7% while its market share decreased marginally in 2008
  • Legal & General' s premiums fell as it has withdrawn from underwriting policies
  • Most of the top 10 health insurers play in the group and individual sectors

FUTURE DECODED

• Introduction
• Datamonitor expects the number of group and individual subscribers to fall in the short-term
  • The number of individual subscribers is expected to fall throughout the forecast period
  • The number of group subscribers is expected to fall in 2009 and 2010 due to the recession but resume growth between 2011 and 2013
  • Premium rates are expected to increase throughout the forecast period

• Total health insurance premium income will grow slowly in 2009 and 2010 before seeing steadier growth between 2011 and 2013
  • Slow growth is expected in 2009 and 2010
  • The group sector is expected to see slightly lower growth than the individual market in the short-term

APPENDIX

• Definitions
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Subscriber numbers and unemployment rate, 1985 - 2008
• Table: UK PMI GEP by sector, 2004 - 08 (£m)
• Table: Number of UK PMI subscribers and number of people covered by policy type, 2004 - 08 (000s)
• Table: Estimated UK PMI average policy premium by policy type and total claims incurred, 2004 - 08
• Table: Comparison of the number of group PMI subscribers and healthcare trust subscribers, 2004 - 08 (000s)
• Table: Are you covered by a private medical insurance policy, either personally or jointly with a partner? Responses split by age (September 2008)
• Table: Are you covered by a private medical insurance policy, either personally or jointly with a partner? Responses split by household income (September 2008)
• Table: Are you covered by a private medical insurance policy, either personally or jointly with a partner? Responses split by socio-economic group (September 2008)
• Table: Who pays the premiums on your private medical insurance policy? Responses split by age (September 2008)
• Table: Marketing spend on PMI products, top 10 advertisers, 2008
• Table: Marketing spend by media, top 10 PMI advertisers, 2008 (%)
• Table: Which of these best describes how you arranged your PMI policy? (September 2008)
• Table: Which of these best describes how you arranged your PMI policy? Responses split by age (September 2008)
• Table: Which of these best describes how you arranged your PMI policy? (September 2008)
• Table: Which of these best describes how you arranged your PMI policy? Responses split by age (September 2008)
• Table: How interested would you be in buying a private medical insurance policy for yourself or your family? (September 2008)
• Table: How interested would you be in buying a private medical insurance policy for yourself or your family? Split by age (September 2008)
• Table: How interested would you be in buying a private medical insurance policy for yourself or your family? Responses split by household income (September 2008)
• Table: Why do you not have private medical insurance? (Multiple responses allowed) (September 2008)
• Table: Why do you not have private medical insurance? Responses split by age (September 2008)
• Table: Gross earned premium and market share of the top 10 UK PMI insurers, 2007 - 08
• Table: Forecast of the number of UK PMI subscribers, 2009 - 13f (000s)
• Table: Forecast of the average PMI premium, 2009 - 13f (£)
• Table: Forecast of UK PMI GEP, 2009 - 13f (£m)

FIGURES

• Figure: The group and individual PMI markets grew again in 2008
• Figure: WPA offers mycancerdrugs as part of its health-top up policy for an additional £4.20 per month
• Figure: The previous recession appears to have taken its toll on the PMI market
• Figure: The group and individual PMI markets grew again in 2008
• Figure: The number of group PMI subscribers grew significantly in 2008
• Figure: Average premium rates continue to rise in order to combat claims inflation
• Figure: Healthcare trust schemes pose a threat to the PMI market
• Figure: There is a significant potential to grow the PMI market
• Figure: The penetration rate of PMI remains broadly the same across different age groups
• Figure: Penetration rises significantly among higher income households
• Figure: The penetration rate of PMI peaks among the AB socio-economic group
• Figure: Consumers over the age of 45 form the core market for individual health insurance
• Figure: Standard Life raised its stake in marketing spending in 2008 while Bupa still spent the most money
• Figure: Bupa, HSA and WPA focused their marketing strategy on TV adverts in 2008
• Figure: The direct channel is the best way to target the individual PMI market
• Figure: A direct distribution strategy is key in acquiring consumers aged over 60
• Figure: Nearly a fifth of policyholders arranged their policy over the phone
• Figure: Phone sales are particularly important in acquiring consumers aged over 60
• Figure: Over 15% of non-PMI customers are interested in buying a policy
• Figure: Consumers aged between 18 and 29 are most interested in buying a private medical insurance policy
• Figure: Mid to higher income consumers are most interested in buying PMI
• Figure: PMI providers must continue to bring low cost products to the market in order to grow volume
• Figure: A high proportion of consumers over 60 years old feel that the NHS gives adequate medical care
• Figure: Pru Health, AXA and Simplyhealth gained market share in 2008
• Figure: Most insurers have a presence in the individual and group markets
• Figure: Group and individual subscriber numbers are expected to dip in 2009 and 2010
• Figure: Average premiums are forecast to increase in both the group and individual markets
• Figure: Datamonitor expects to see slow growth in the health insurance market in 2009 and 2010 before steadier growth resumes between 2011 and 2013