Private medical insurance premiums look set to go on rising as the cost of claims continues to soar, a report said today.
The health insurance industry was facing a dual problem of more people making increasingly expensive claims on their policies, while the number of consumers taking out the insurance fails to grow, according to independent market analyst Datamonitor.
James Allingham, author of the report, said take up levels of the policies remained low because of high premiums, uncertainty over Government health initiatives, and ignorance about the cost of long-term health care.
He added: "Although awareness of the 'demographic time bomb' and the likely reduction of state provision for the costs of old age is increasing, many consumers still do not appreciate the likelihood of having to meet the costs of provision privately." The number of people in the UK with private medical insurance (PMI) remained almost static during the past five years, increasing to 6.2 million in 2000 from just under 6 million in 1995. During this period the number of people with individual policies fell from 1.3 million to 1.2 million, after premiums increased by an average of 6.9% a year for the five years to 2000, leaving many people unable to afford the schemes.
But group PMI policies bucked this trend with membership increasing by half a million to 2.3 million between 1995 and 2000 as increasing numbers of companies took out schemes for their employees.
Premium increases in the group PMI market were also not as great as in those seen in the individual sector, rising by just 2.8% a year over the same period.
Datamonitor said the main reason behind the premium increases was a rise in the number of people claiming on their policies and an increase in the cost of these claims.
The majority of claims came from people who were over 60, contributing to the rise in the cost of individual policies as the majority of this age group belong to these schemes.
The group added that long NHS waiting lists leading to an increase in the number of operations carried out in private hospitals also helped boost claims, although it had not led to a significant increase in demand for PMI.
Mr Allingham said: "There has been a period of sustained increases in claims costs without a concomitant rise in premium income from new policyholders. "Instead, a static customer base is demanding more of its private medical insurers, leading to increasing claims costs per policyholder."
He said that health insurers should consider tailoring policies to meet individual's needs and advertising over the Internet to attract new customers. Mr Allingham added that insurers also needed to reduce premiums, which they could do through offering policies with excesses similar to the ones offered by the motor insurance industry.
