The number of people in Britain taking out private medical insurance has risen significantly for the first time since 2008, amid fears about the ongoing crisis gripping the NHS.
After falling steeply between 2008 and 2011 and then staying flat, demand for private medical insurance cover in Britain rose by 2.1% in 2015 with just over 4 million people insured.
The figures, compiled by healthcare consultancy LaingBuisson, account for the period until the end of 2015. Figures for 2016 are not yet available.
Philip Blackburn, an economist at LaingBuisson, said: “There has been a clear rise in interest in private healthcare recently as more and more people are dissatisfied with higher waiting on the NHS and increased restrictions on NHS treatment. Private medical cover will benefit from this, and there is a wide choice of policy options at different prices to attract customers.”
The rise in sales of private medical insurance (PMI) comes despite increases in insurance premium tax (IPT) during the period from 6% to 9.5%, which has made policies more expensive. But the private medical industry is still far below its peak in 2008, when 4.35 million people – 12.4% of the UK population – had private cover. After the rise in 2015, a total of 4,022,000 people have cover, or 10.6% of the population.
All of the rise in private cover is coming through company schemes, where the number of employees with medical insurance rose by 3.4% to 3,070,000 people, or 76.3% of the total. This suggests that the increased popularity of PMI may be down to a recovery in the economy and companies taking more staff, rather than fears about the state of the NHS.
The number of individual subscribers to private medical insurance continued to decline, dropping by 1.7% to 952,000.
Most are put off by the rising cost of buying cover independently. A typical PMI policy for a healthy 35-year-old costs about £650 a year, but this rises steeply to £2,300 for those aged 70, when claims are far more likely.
But the LaingBuisson data suggests that the companies and private hospitals selling cover are enjoying bumper profit margins. Companies and individuals spent £4.7bn on private medical insurance in 2015, but the total value of claims was £3.6bn, leaving the providers with a gross profit of £1.1bn.
LaingBuisson estimated that the total gross profit margin for PMI providers rose from 25.9% in 2014 to 26.7% in 2015. But it added that further tax rises and Brexit may make 2017 a tough year for the industry.
“A sharp increase in IPT from 6% to 9.5% effective from November 2015, and further rise to 10% from November 2016 has loaded significant additional cost for all medical insurance customers. A further hike to 12% in June 2017 will tighten this ‘taxation straitjacket’, and in an industry where affordability has been identified as the primary reason for a lack of growth in demand, this hefty additional burden is likely to mean demand for PMI is vulnerable going forward,” said Blackburn, adding that “the medical cover sector faces further uncertainty from the UK’s impending exit from the European Union.”
