Fiona Murphy asks how the individual PMI market has fared over the past year and how it can combat lagging demand.
It has been a truth universally acknowledged that Individual PMI continues to be a difficult market to operate in or advise on, in terms of poor consumer take-up, spiralling claims costs and its adverse impact on premium pricing.
However, the decline might be becoming less marked, according to new research, and with the market set to experience various changes to how it operates over the next few years, this trend might be here to stay.
Solid demand
Laing & Buisson's latest report said demand for health cover was solid in 2012 as the number of private medical cover policies in the UK (both insured and self-insured) moved upwards by 1.1% to reach 4.033m at the start of 2013.
However, this small rise in policies was driven by a shift towards self-insured medical expenses schemes in the employer market.
Meanwhile, the report said, amid struggling economic growth, "vulnerable household budgets have put pressure" on individual demand for cover.
In 2012 the number of individual paid policies dropped by 1.5% - or 15,500 policies - the decline was much smaller than in previous years (down 31,800 in 2011 and 50,800 in 2010) suggesting that demand for individual cover may be looking to level off in the near term.
However, overall penetration of the UK population by private medical cover remained at an estimated 10.8% at the start of 2013: the lowest rate in over 20 years.
The author of the report, economist Philip Blackburn said: "At a time when the economy is struggling to grow at all, solid demand for private medical cover offers the industry a clear chink of light that growth is likely to move forwards when the economy wheels start to turn faster.
"The strength of employer funded private medical cover is a positive, and a more modest decrease in individual demand provides optimism that the ‘worm could be turned' by insurers in this market area"
However, he acknowledged that upward pressures on claim costs continue to "shadow prospects" of wider penetration for the sector.
Nick Jones, brand and marketing manager at Exeter Family Friendly has agreed with the issues raised in the report and its effect on the industry as a whole.
He admits: "There has been a lot of talk and commentary over the past year about how difficult the PMI market has been."
Dave Priestley, sales director at Pru Health said: "It remains a huge untapped opportunity. If you look at the headline statistics overall PMI is about 10% of the population, less than half of that is people who buy individual cover. The numbers of people purchasing are very low. If you look at the profile of customers who have traditionally bought products, the number of people who fit that profile is growing.
"You have this disconnect between those who fit that profile as traditional purchasers of PMI and the number of people buying it, so the gap is widening. The question is, what's behind that, what is happening? It's well understood that premiums are rising faster than inflation but equally consumers do not perceive value to in the products where they see premiums increasing by 10% every year.
With such mixed optimism for growth have we seen innovations to try to tackle some of the issues identified by Laing & Buisson?
Jones adds: "Other insurers have been trialing measures that they claim will help them better manage claims costs, while also tweaking already complex products to try and appeal to a wider audience of consumers and advisers.
