Private Medical Insurance - UK - September 2007

Table of Contents

• Issues in the MarketKey issues
• Market definitions
• Abbreviations
• Market in Brief
• A game of two halves
  • Figure 1: Number of PMI subscribers and gross earned premiums, by sector, 1996, 2006 and 2007
• The forces at play
• The challenge
• The opposition has just got better
• Two brands dominate the field
• Brand reinforcement
• Selling the brand
• So who' s buying?
• Are members happy?
• Hygiene concerns give insurers an advantage
• Purchasing persuaders
• Broader Market Environment
• Key points
• Steady income growth forecast
  • Figure 2: Total PDI, consumer expenditure and PDI per capita, at constant 2003 prices, 2003-12
• Outlook
• Implication
• Corporate UK in fine fettle
  • Figure 3: Gross operating surplus of private non-financial corporations, 2000-06
• Implication and opportunity
• Workers want health benefits
  • Figure 4: Top ten company benefits and ten most desired, January 2007
• Scope to target more SMEs
  • Figure 5: Number of private sector enterprises, employees and turnover -- UK, start 2006
• Implication and opportunity
• The business argument for PMI
• Implication and opportunity
• Employment trends
• New age discrimination laws undermine the sustainability of group PMI
• Extra regulatory burden
• Ageing in poor health
  • Figure 6: Years of poor health, by gender -- England and Wales, 1981 and 2001
• Implication and opportunity
• Cancer risk increases with age
  • Figure 7: Age-specific incidence of all cancers, by gender -- UK, 2003
• Lifestyle illnesses
• Implication
• Sun worshippers beware
• Smoking continues to lose appeal...
  • Figure 8: Prevalence of cigarette smoking among GB adults aged 16+, by gender, 1974-2005
• Implication
• ...but obesity is on the rise...
  • Figure 9: Number of obese men and women -- England, 2003 and 2010
• Implication
• ...and alcohol remains the number one vice
  • Figure 10: GB adults exceeding specified levels of alcohol*, by gender and age, 2005
• Implication
• Lifestyle underwriting
• Recreational activities
  • Figure 11: Top ten sports, games and physical activities among adults in England, by gender and age, 2005/06
• Implication and opportunity
• Internal Market Environment
• Key points
• Greater spending on the NHS...
  • Figure 12: NHS expenditure (England), 2000/01-2007/08
• ...leads to shorter waiting times...
  • Figure 13: Inpatient waiting times (England), 2003-07
  • Figure 14: Outpatient waiting times (England), 2004-07
• Implication
• ...but there will be reduced investment post-2008
• Implication and opportunity
• Claims costs pick up in 2006 after three years of slower growth
  • Figure 15: Claims amount incurred and claims as a proportion of gross earned premiums, 1998-2006
• Implication
• Better claims management and increased competition slow premium inflation
  • Figure 16: Average PMI premium, by sector, 2002-07
• Implication
• Competitive Context
• Key points
• Healthcare funding options
  • Figure 17: The main methods of obtaining healthcare treatment in the UK, 2007
• Self-insured schemes are proving popular with large employers
  • Figure 18: Number of subscribers and people covered by PMI and healthcare trust schemes, 2002-06
• Penetration of PMI and related healthcare products
  • Figure 19: Penetration of PMI and related healthcare products, July 2007
• Demand for dental plans boosted by decline in NHS dentistry
• Health cash plans are a low-cost alternative
  • Figure 20: Number of health cash plan subscribers, people covered and contribution income earned, 2002-06
• Strengths and Weaknesses in the Market
  • Figure 21: PMI -- SWOT analysis, 2007
• Market Size and Forecast
• Key points
• A rejuvenated market
  • Figure 22: Number of PMI subscribers, people covered and gross earned premiums, 2002-07
• Individual business represents an important revenue stream
  • Figure 23: Proportional distribution of PMI subscribers, people covered and gross earned premiums, by sector, 2007
• New sales opportunities
• A slight pick-up in subscriber numbers...
  • Figure 24: Number of PMI subscribers and people covered, by sector, 2002-07
• ...boosts total premium income
  • Figure 25: PMI gross earned premiums, by sector, 2002-07
• Gradual expansion in subscriber numbers forecast
  • Figure 26: Number of PMI subscribers and people covered, by sector, 2002-12
• Healthy income growth expected
  • Figure 27: PMI gross earned premiums, by sector, 2002-12
• Premium rate growth
• Factors incorporated
• Market Share
• Key points
• Movers and shakers
• BUPA and AXA PPP dominate the market
  • Figure 28: PMI provider rankings, by subscription income, 2005 and 2006
• The top four all see market share growth
  • Figure 29: Illustration of PMI providers' market shares, 2005 and 2006
• Third-party administrators
• Companies and Products
• BUPA
• AXA PPP healthcare
• Norwich Union Healthcare
• Standard Life Healthcare
• CIGNA HealthCare
• WPA
• Simplyhealth Group
• Exeter Friendly Society
• PruHealth
• CS Healthcare
• Brand Communication and Promotion
• Key points
• Adspend stabilises
  • Figure 30: Total advertising expenditure on health insurance products, 2002/03-2006/07
• TV and direct mail account for the largest proportion of spend
  • Figure 31: Proportional distribution of health insurance adspend, by main media type, 2002/03-2006/07
• BUPA' s strong brand maintained by high ad investment
  • Figure 32: Top ten advertisers of health insurance products, by adspend, 2004/05-2006/07
• In sickness and in health
• Channels to Market
• Key points
• Intermediaries generate the majority of corporate PMI sales...
  • Figure 33: Proportional distribution of PMI sales, by channel, 2005 and 2006
• ...while most individual sales are arranged direct
• Implication and opportunity
• Online progress
• Strategic partnerships: enter the retailers
• The Consumer 1 -- PMI Penetration
• Key points
• Survey background
• PMI is one of the more commonly held protection products
  • Figure 34: Ownership of PMI and other related products, July 2007
• Observation
• Significant overlap
  • Figure 35: Ownership of PMI and other related products -- cross-analysis, July 2007
• Implication
• Corporate PMI holds ground
  • Figure 36: Trends in ownership of PMI and other health products, 2003, 2005 and 2007
• Around one in six members are covered by a partner' s policy
  • Figure 37: Distribution of PMI, by method of arranging policy, July 2007
• The typical PMI subscriber is a 35-44-year-old man
• Implication and opportunity
• CHAID analysis
  • Figure 38: Target groups identified for health insurance products, July 2007
• Standard policies are the most popular
  • Figure 39: Type of PMI policy owned, July 2007
• Over-55s tend not to scrimp on cover
  • Figure 40: Type of PMI policy owned, by gender and age, July 2007
• ABs are most likely to have comprehensive cover
  • Figure 41: Type of PMI policy owned, by socio-economic group and household income, July 2007
• The Consumer 2 -- Policyholder Experience
• Key points
• Family policies account for a fifth of the market
  • Figure 42: PMI member attitudes and experiences, July 2007
• Implication
• Scope to improve customer service
• Implication and opportunity
• Low level of turned-down claims
• Implication
• Switching is more prevalent in the personal sector
• Implication and opportunity
• Comprehensive policyholders are most satisfied...
  • Figure 43: PMI member attitudes and experiences, by type of cover, July 2007
• Implication
• ...and also the most likely to make a claim
• Implication
• No-claims bonus is relatively rare
• Claims ratio rises with age
  • Figure 44: PMI member attitudes and experiences, by gender and age, July 2007
• Implication and opportunity
• Those who can afford to will extend cover to other family members
  • Figure 45: PMI member attitudes and experiences, by socio-economic group and household income, July 2007
• PMI Penetration -- Detailed Demographics
  • Figure 60: Ownership of PMI, by method of arrangement and by gender, age, socio-economic group, marital status, lifestage, Mintel' s Special Groups and working status, July 2007
  • Figure 61: Ownership of PMI, by method of arrangement and by tenure, gross annual household income, region and ACORN category, July 2007
  • Figure 62: Ownership of PMI, by method of arrangement and by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, July 2007