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| MAPS : Medical and Health Insurance: July 2004 |
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This report covers: medical,and, health, insurance, long-term, General, income protection, care insurance, private medical insurance and cash plans, BUPA, Personal accident, percuniary loss, mortgage indemnity, legal fees insurance, main media advertising,
companies covered include: American International, Group, Axa, UK, France, Canada Life, Combined Insurance Compnay of America, GE Insurance Holdings, Norwich Union Healthcare, Royal and Sun Alliance, Standard Life Healthcare, Swiss Reinsurance Company UK, Switzerland, Unumprovident, Corporation
EXECUTIVE SUMMARY
| Executive Summary |
| STRATEGIC OVERVIEW |
| Medical and health-related insurances extend across the general and long-term insurance markets, but form minor components of both. The leading medical insurers are BUPA, AXA PPP, Norwich Union and Standard Life. The keenest buyers of protection insurances are managers and professionals — ABs — whose employers often pay the premiums. Full-time workers with young families and mortgages are also core customers. |
| LONG-TERM INSURANCE CATEGORIES OF PROTECTION COVER |
| Income protection insurance enjoyed annual growth between 1999 and 2002, but slipped back in 2003. In 2004, income protection insurance, including critical illness and mortgage payment protection cover, is worth an estimated £2bn to £2.1bn in net premiums in the UK. A lack of advertising promotion suggests that insurers do not expect the market to expand. As yet, few adults insure against redundancy, although penetration doubled in 2002/2003, albeit to 2% of households. Premiums for redundancy cover in 2004 are fairly low because employment rates are high. Cover costs for illness are rising because of both negative factors (e.g. stress and obesity) and positive factors (e.g. improved treatments that keep people alive for longer). |
| Mortgage payment protection insurance, covering policyholders against the inability to make repayments due to accident, sickness or unemployment, expanded from 1.7 million policies in force at the end of 1998, to 2.7 million at 30th June 2003. Mortgage protection, or mortgage-related term assurance, repays the mortgage if the policyholder dies. The number of new contracts, 1.2 million in 2003 against 510,000 in 1999, indicates the huge churn in the mortgage market as borrowers remortgage to release cash. |
| Standalone critical illness insurance sold to individuals is not a lively market. Critical illness cover is far more popular as an add-on to another form of policy than as a separate product. A fall in average premium value suggests a degree of under insurance — a factor also pertaining to private medical insurance (PMI) policies sold to individual customers. |
| The long-term care insurance market is tiny and did not increase in 2003. The long-term care market highlights two negative factors afflicting insurers: consumers' reluctance to think ahead and to trust other people with their money. |
| GENERAL INSURANCE CATEGORIES OF PROTECTION COVER |
| The number of people covered by both corporate and personal PMI has fallen since 1984. However, the typical annual premium paid for an individual rose by 50% between 1998 and 2003, far outstripping inflation. Corporate schemes covered 2.6 million subscribers by the end of 2002, compared with fewer than 1.2 million in 1984. Employer-funded PMI is a perk for staff whose services are valuable enough for them to be able to negotiate benefit packages. BUPA leads the overall PMI market, followed by AXA PPP and Norwich Union. |
| Budget plans such as AIG's HealthNow offer a way forward. HealthNow concentrates on cover for conditions that the NHS generally does not treat quickly. Cash plans such as Groupama's Cashwise (which focuses on treatments not available from the NHS, such as dental and optical care, and complementary therapies) are also gaining popularity. |
| Gross written premium income for accident insurance rose strongly between 1999 and 2002. Under government pressure, insurers are now moving away from one-off lump-sum payments for serious personal injury and towards regular payments. The Government's action makes accident insurance less desirable for some potential victims, because the insurance payment substitutes for state benefits that could be obtained without paying any premiums. |
| Since its introduction in 1995 and its extension to civil non-family proceedings in 1998, conditional fee insurance has promoted post-accident claims in the UK. In 1999, the Access to Justice Act gave claimants the right to reclaim insurance costs from the losing party. Rapid escalation in legal fees insurance for accident compensation claims saw both gross earned premiums and claims incurred more than double between 1999 and 2001. |
| AN INTERNATIONAL PERSPECTIVE |
| In the US, public spending accounted for a higher proportion of total healthcare spending in 2001 than in 1970. Voluntary insurance cannot fund universal healthcare anywhere in the world. In the UK, the significance of private healthcare rose in the 1980s and 1990s, but the NHS is now making a comeback. Throughout the more developed world, the state will remain the main provider of healthcare and emergency incomes. However, the ageing populations of the mature economies will create such huge demands on state healthcare provision that something will have to give. Forms of healthcare rationing appear inevitable. |
| In China, sales of workplace accident insurance policies are growing fast, partly as a reaction to employers' patchy response to health and safety guidelines. This is a hazardous path for insurers. Similar risks apply to accident policies in all rapidly growing economies with indifferent or weak health and safety regulation. |
| PEST ANALYSIS |
| The 'third way' followed by New Labour — essentially, public-private partnerships (PPPs) — is highly beneficial for the private healthcare sector. The inclusion of private companies as NHS treatment providers will enable the private sector to grow significantly. The PPPs now being established, including deals with South African, Canadian and US healthcare companies, should create a lot more competition with the private sector, keeping the lid on prices and thus also on medical insurance premiums. |
| The converse of downward pressures on private-sector costs is the rising capacity in the NHS, provided by the private sector. This is likely to limit demand for PMI, so that there will be little change for PMI in the short and medium term. |
| Only the top 30% of households by income spend more than £2 a week, on average, on medical insurance. The highest earners are also the most likely to receive medical insurance as part of their remuneration package, while few employers provide this benefit for casual or low-paid permanent staff. |
| THE FUTURE |
| The private healthcare sector has good prospects as a result of the NHS's new willingness to work in partnerships with the private sector. At least 80 privately-operated treatment centres for NHS patients are expected to be functioning by 2005. If inflation climbs upwards the resulting job losses would mean higher state benefit payments and lower tax revenues, so commitments to the NHS would have to be reviewed. |
| Key Note does not expect a substantial rise in the real value of net premiums between 2004 and 2009. The group PMI and protection market has better prospects in the short and medium term than the individual market, because of employers' wishes to safeguard their prime staff. For individual purchasers, cash plans for treatments not covered by the NHS, and budget PMI for treatments requiring long NHS waits, have a bright outlook. Fixed-price treatments — from organisations such as Nuffield Hospitals — are expected to continue their rise in popularity. |
| Income protection should assume more importance from 2008/2009 onwards if, as Key Note expects, unemployment rises in the wake of insecure energy supplies. Demand will be constrained by above-inflation rises in premiums as insurers seek to cushion themselves against higher numbers of claims. The long-term care insurance market should continue to grow at a steady pace, albeit from a low base. Much of the growth will be in immediate annuities to meet care costs when they are unavoidable. |
TABLE OF CONTENTS
| Executive Summary |
| STRATEGIC OVERVIEW |
| LONG-TERM INSURANCE CATEGORIES OF PROTECTION COVER |
| GENERAL INSURANCE CATEGORIES OF PROTECTION COVER |
| AN INTERNATIONAL PERSPECTIVE |
| PEST ANALYSIS |
| THE FUTURE |
| 1. Introduction |
| REPORT COVERAGE |
| DEFINITION |
| Long-Term Insurance |
| General Insurance |
| 2. Strategic Overview |
| MARKET DYNAMICS AND SEGMENTATION |
| Table 1: UK Households with Insurance Cover (%), 2001/2002 and 2002/2003 |
| DISTRIBUTION |
| Table 2: Distribution of General Insurance in the UK (% of premiums gross of reinsurance ceded), 1992 and 2002 |
| competitive structure |
| THE CONSUMER |
| MARKET FORECASTS |
| KEY POINTS |
| 3. Long-Term Insurance |
| INCOME PROTECTION INSURANCE |
| Income Protection Slipping Back |
| Table 3: Income Protection Insurance in the UK — Regular Premiums and Individual Policies (000 and £m), 1999-2003 |
| Group Sales Substantially Exceed Individual Sales |
| Table 4: Group Sales of Income Protection Insurance in the UK — New Premiums (£m), 2000-2003 |
| Little Advertising for Income Protection |
| MORTGAGE PROTECTION INSURANCE |
| Mortgage Cover Rises Steeply |
| Table 5: Mortgage-Related Term Assurance in the UK — Regular Premiums and Individual Policies (000 and £m), 1999-2003 |
| Limited State Help — But Borrowers Not Yet That Bothered |
| Table 6: Insurance Against Redundancy in the UK (% of households), 2001/2002 and 2002/2003 |
| Norwich Union — The Top Mortgage Protection Advertiser |
| Award for `Helpupay' |
| Direct Line Leads Mortgage Term Cover Advertising |
| CRITICAL ILLNESS INSURANCE |
| Fewer Contracts, Higher Premiums |
| Table 7: Critical Illness Insurance in the UK — Standalone Regular Premium Individual Policies (000 and £m), 1999-2003 |
| Table 8: Critical Illness Insurance in the UK — Regular Premium Individual Life Policies with an Amount of Critical Illness Cover as a Rider Benefit (000 and £m), 1999-2003 |
| Group Market — Plenty of Scope for Growth |
| Table 9: Group Sales of Critical Illness Insurance in the UK — New Premiums (£m), 2000-2003 |
| Advertising |
| CARE INSURANCE |
| Looking Ahead is Unpopular |
| Table 10: Long-Term Care Insurance in the UK — Trends in Policies (number of new policies), 1999-2002 |
| Just-in-Time Policies are More in Demand |
| Table 11: Long-Term Care Insurance in the UK — Trends in Premiums (£000), 1999-2002 |
| Table 12: Long-Term Care Insurance in the UK — Total Policies in Force (number), 1999-2002 |
| Devolution Unlevels the Playing Field |
| Disincentives to Saving |
| Issues of Vision and Trust |
| KEY POINTS |
| 4. General Insurance |
| PRIVATE MEDICAL INSURANCE AND CASH PLANS |
| What Sickness Costs |
| Narrow Margins |
| Table 13: Medical Insurance in the UK — Trends in Premiums and Claims (£m), 1999-2002 |
| Individual PMI in Doldrums |
| Table 14: Private Medical Insurance in the UK — Subscribers and Persons Covered (000), 1984 and 1994-2002 |
| Context Does Not Favour Growth |
| Budget and Cash Plans — The Way Ahead |
| BUPA Dominates |
| Table 15: Estimated Market Share of Private Medical Insurance (% of net premium income), 1992, 1997, 2001 and 2004 |
| Table 16: Main Media Advertising Expenditure on Private Healthcare (£000 and %), Year Ending December 2003 |
| PERSONAL ACCIDENT INSURANCE |
| Rising Trend |
| Table 17: Accident Insurance — Trends in Premiums and Claims (£m), 1999-2002 |
| Prospect of Higher Premiums |
| Niche Ambitions |
| PECUNIARY LOSS INCLUDING MORTGAGE INDEMNITY INSURANCE |
| Pecuniary Loss can be a Loser for Insurers |
| Table 18: Pecuniary Loss Insurance — Trends in Premiums and Claims (£m), 1999-2002 |
| LEGAL FEES INSURANCE |
| Lawyers the Main Winners |
| Table 19: Legal Expenses Insurance — Trends in Premiums and Claims (£m and number), 1999-2001 |
| £27m Pumped into Compensation Advertising |
| Table 20: Main Media Advertising Expenditure on Solicitors, Including Injury Claims (£000 and %), Year Ending December 2003 |
| KEY POINTS |
| 5. Promotion |
| MAIN MEDIA ADVERTISING |
| Table 21: Main Media Advertising Expenditure on Health and Accident Financial Services (£000 and %), Year Ending December 2003 |
| National Accident Helpline Spends the Most |
| Charities and Mutuals Have Trust Advantage |
| KEY POINTS |
| 6. An International Perspective |
| VOLUNTARY INSURANCE CANNOT FUND UNIVERSAL HEALTHCARE |
| Table 22: Public Spending on Healthcare as a Percentage of Total Expenditure on Healthcare, 1970, 1980, 1990, 2000 and 2001 |
| NIGHTMARE OF LIABILITY CLAIMS |
| CHINA: FAST BUT RISKY EXPANSION |
| KEY POINTS |
| 7. PEST Analysis |
| POLITICAL FACTORS |
| Private Partnerships with the NHS are the Way Ahead |
| Little Change in Demand for PMI |
| Table 23: Forecast Total Net Expenditure on the NHS (£bn), 2002/2003-2005/2006 |
| ECONOMIC FACTORS |
| Low Spends on Medical Insurance |
| Table 24: UK Household Expenditure on Medical and General Insurance by Income Decile (£ per week), 2002/2003 |
| Table 25: UK Household Expenditure on Medical Insurance by Age of the Household Reference Person (£ per week), 2002/2003 |
| Weakest Demand in North East England and Scotland |
| Table 26: UK Household Expenditure on Medical and General Insurance by Region (£ per week), 2002/2003 |
| SOCIAL FACTORS |
| Insurance to Protect Dependants |
| Table 27: Penetration of Protection Insurances in the UK by Household Size (% of all households), 2002/2003 |
| Little Protection for the Retired, Disabled and Unemployed |
| Table 28: Penetration of Protection Insurance in Elderly, Unemployed and Disabled Households in the UK (% of all households), 2002/2003 |
| South East England leads in PMI |
| Table 29: Penetration of Mortgage Protection, Private Medical and Personal Accident Insurances by Region (% of households in each region), 2002/2003 |
| Table 30: Penetration of Mortgage Protection, Private Medical and Personal Accident Insurances by Age of Head of Household (% of all households), 2002/2003 |
| Impact of Demographic Ageing |
| Table 31: The Forecast UK Population by Age (million), 2004, 2006, 2008, 2010 and 2012 |
| TECHNOLOGICAL FACTORS |
| KEY POINTS |
| 8. Consumer Dynamics |
| INTRODUCTION |
| ALMOST EVERYONE NEEDS THE NHS |
| "I Rely Solely On The NHS And State Benefits To Care For Me If I Am Ill Or Injured" |
| "I Have Sufficient Private Medical Insurance To Ensure That I Never Have To Use The NHS" |
| Table 32: Enough Insurance Provision to Avoid the NHS Completely (% of respondents), 2001 and 2004 |
| Table 33: Heavy Dependence on the NHS (% of respondents), 2004 |
| MEDICAL INSURANCE — A MINORITY CONCERN |
| "I Have Insurance So That I Do Not Have To Depend Totally On The NHS If I Am Ill Or Injured" |
| Table 34: Insurance to Avoid Total Dependence on the NHS (% of respondents), 2001 and 2004 |
| "In The Past I Have Paid In Full For Private Medical Treatment Rather Than Wait For Care From The NHS" |
| Table 35: Paying in Full for Private Treatment (% of respondents), 2001 and 2004 |
| Table 36: Avoiding Total Dependence on the NHS and Paying for Private Medical Treatment (% of respondents), 2004 |
| INCOME PROTECTION NO MORE POPULAR THAN PMI |
| "I Have Private Medical Insurance To Pay For Private Treatment If I Am Ill Or Injured" |
| Table 37: Penetration of Private Medical Insurance (% of respondents), 2001 and 2004 |
| "I Have Income Protection Insurance To Give Me An Income If I Am Unable To Work Due To Illness Or Injury" |
| Table 38: Penetration of Income Protection Insurance (% of respondents), 2001 and 2004 |
| Table 39: Penetration of Private Medical Insurance and Income Protection Insurance (% of respondents), 2004 |
| ACCIDENT INSURANCE IS POPULAR — BUT NOT AS POPULAR AS COMPENSATION |
| "I Have Personal Accident Insurance To Provide Compensation If My Family Or I Are Injured Or Killed In An Accident" |
| Table 40: Penetration of Personal Accident Insurance (% of respondents), 2001 and 2004 |
| "I Would Make A Claim For Compensation If I Suffered An Accident And Did Not Think It Was My Fault" |
| Table 41: Intention to Claim Compensation (% of respondents), 2001 and 2004 |
| Table 42: Penetration of Personal Accident Insurance and Compensation Claimants (% of respondents), 2004 |
| LOWER PREMIUMS WOULD OPEN UP THE MARKET TO FAMILIES ON MODERATE INCOMES |
| "If Premiums Were Lower I Would Take Out Personal Accident Insurance To Provide Compensation For Myself Or My Family If I Were Injured Or Killed In An Accident" |
| Table 43: Propensity to Take Out Accident Insurance If Premiums Were Lower (% of respondents), 2001 and 2004 |
| "If Premiums Were Lower I Would Take Out Private Medical Insurance To Pay For Private Treatment If I Were Ill Or Injured" |
| Table 44: Propensity to Take Out Private Medical Insurance if Premiums Were Lower (% of respondents), 2001 and 2004 |
| Table 45: Take Up of Personal Accident and Private Medical Insurance if Premiums were Lower (% of respondents), 2004 |
| MORE PMI POLICIES ARE SELF-FUNDED THAN PAID BY EMPLOYERS |
| Table 46: Payment of Private Medical Insurance Premiums (% of respondents), 2004 |
| FEW HAVE SUFFICIENT FINANCIAL RESOURCES FOR PEACE OF MIND |
| "If Premiums Were Lower I Would Take Out Income Protection Insurance To Protect My Income If I Were Unable To Work Because Of Illness Or Injury" |
| "I Would Have Enough Money To Be Comfortable If I Had A Major Injury Or Illness Which Prevented Me From Working Or Leading A Normal Life" |
| Table 47: Enough Money to be Comfortable in the Event of a Major Illness or Injury (% of respondents), 2001 and 2004 |
| Table 48: Take Up of Income Protection Insurance if Premiums Were Lower and Financial Well-Being if Prevented from Working or Leading a Normal Life (% of respondents), 2004 |
| KEY POINTS |
| 9. Company Profiles |
| INTRODUCTION |
| AMERICAN INTERNATIONAL GROUP (US) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Future Company Developments |
| AXA UK PLC (FRANCE) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 49: Financial Results for AXA UK PLC (£m, % and £), Years Ending 31st December 2000-2002 |
| Future Company Developments |
| BUPA (UK) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Future Company Developments |
| CANADA LIFE LTD (CANADA) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 50: Financial Results for Canada Life Ltd (£m, £000, % and £), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| COMBINED INSURANCE COMPANY OF AMERICA (US) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 51: Financial Results for Combined Insurance Company of America ($m, % and $), Years Ending 31st December 2000-2002 |
| Future Company Developments |
| GE INSURANCE HOLDINGS LTD (US) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 52: Financial Results for GE Insurance Holdings Ltd (£m, % and £), Years Ending 31st December 2000-2002 |
| Future Company Developments |
| NORWICH UNION HEALTHCARE LTD (UK) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 53: Financial Results for Norwich Union Healthcare Ltd (£m, % and £), Years Ending 31st December 2000-2002 |
| Future Company Developments |
| ROYAL & SUN ALLIANCE PLC (UK) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 54: Financial Results for Royal & Sun Alliance Insurance PLC (£m, % and £), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| STANDARD LIFE HEALTHCARE LTD (UK) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 55: Financial Results for Standard Life Healthcare Ltd (£m, % and £), Years Ending 15th November 2000-2002 |
| Future Company Developments |
| SWISS REINSURANCE COMPANY UK LTD (SWITZERLAND) |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Table 56: Financial Results for Swiss Reinsurance Company UK Ltd (£m, £000, % and £), Years Ending 31st December 2001-2003 |
| Future Company Developments |
| UNUMPROVIDENT CORPORATION |
| Corporate Strategy |
| Advertising and Distribution |
| Profitability |
| Future Company Developments |
| KEY POINTS |
| 10. The Future |
| GREATER FOCUS ON RETAINING EXISTING CUSTOMERS |
| THE PARTICULAR CASE OF DENTISTS |
| INSURANCE DECISIONS ARE MORE COMPLEX |
| LEARNING TO MAKE DO WITH LESS |
| Table 57: Forecast Demand for Medical and Related Insurances at Constant 2004 Prices (£m), 2004-2009 |
| KEY POINTS |
| 12. Further Sources |
| Associations |
| Publications |
| General Sources |
| Government Sources |
| Bonnier Information Sources |
Text © 2004 Key Note
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Last updated by Amanda Porteous September
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