Brexit-fuelled political uncertainty, the sharp hike in insurance premium tax (IPT) and an increase in patients self funding have been blamed for a stagnating private medical insurance market, says Laing Buisson.
But corporate cash plans soared 11.8 per cent in 2016, and now cover a record 1.01m employees, says LaingBuisson. Demand for individual health cash plans fell 6.8 per cent during 2016. Cash plans now cover 5.2 per cent of the UK population.
The consultancy’s annual healthcare market shows the market for private medical cover, worth £4.8bn, flatlined in 2016 with 4.02 million policies covering 6.89 million lives in 2016, representing 10.5 per cent of the population. The flat figures for 2016 follow a buoyant 2015 when two large corporates extended medical cover to their entire employee population, providing a significant boost, and the first significant growth since years of decline after the recession of the late 2000s.
In 2016 there was a small 0.6 per cent growth in corporate medical cover policies, which reached 3.09 million, and covered 5.42 million lives – 8.3 per cent of the population. But there was a 2.2 per cent contraction in individual paid policies to 928,000, a similar fall as posted in the previous three years, with 1.47 million people, 2.2 per cent of the population, now covered.
Static demand for private medical cover in 2016 contrasts with buoyant demand for private healthcare from self-payers, as ‘pay as you go’ spending is currently growing by 10 per cent per annum.
Report author Philip Blackburn says: “The uncertain economic landscape triggered by Brexit snuffed out the whiff of optimism from corporate private medical cover growth in 2015, and future significant growth is likely to need a solid upturn in business confidence from corporate Britain. Nevertheless, private medical cover is highly valued by employees, and employers are increasingly committed to workplace benefits and services which support employee health and wellbeing, and quick access to healthcare services, which private cover offers, is the vital cornerstone.
“Despite very high waits for many on the NHS, and a steady increase in average NHS waiting, overall demand for private medical cover from individuals continues to decline. This is largely attributed to the high price of medical cover, and consistent premium increases well above inflation. The challenge insurers’ face to turn this around was dealt a heavy blow when HM Treasury doubled Insurance Premium Tax – from 6 to 12 per cent between November 2015 and June 2017, leading to sharp upward pressure on premiums for insurance customers, and a significant tax burden going forward. A slowdown in household spending in 2017 also doesn’t help.
“As a low cost cover option, health cash plans continue to be very popular with employers, as the number of employer funded policies has almost doubled in the space of five years. This has inevitably crowded out some employee funded cash plan schemes, but a continued drop-off in personal cash plan purchases is a concern as new business in this area is hard to stimulate. Again the additional tax burden from Insurance Premium Tax pushes up the price of cover.”
Association of Medical Insurers and Intermediaries AMII chairman Stuart Scullion says: “It is disappointing to note that the UK market for private medical cover flatlined in 2016, but these results are not unexpected.
“The current political uncertainty, implications of Brexit, along with further increases in Insurance Premium Tax, all mean our industry is entering an unprecedented decade of change.
“I have previously described the increases in IPT as an ill-conceived and ill thought through taxation, and as an industry we know these increases will push consumers away from the private sector and simply add further strain on the NHS.
“What’s more the new General Data Protection Regulation (GDPR), which will come into force in May 2018, are placing additional strain on insurers, intermediaries and employers in preparation for what will be the biggest change to data protection legislation in a number of years.
“The report’s findings are an early indication that these challenges are already starting to impact on our market.”