War and inflation hit PMI market

High inflation and the economic fall-out from the Ukraine war and sanctions against Russia could hit demand for private medical insurance, market analysts warn. 

The financial problems will reduce personal disposable income as well as increase margin pressure on companies, they say. 

But the positive side for private health interests is seen as the huge backlog the NHS is struggling with as a result of Covid and shortages of qualified healthcare staff, which the Government recognises will take several years to correct. 

LaingBuisson’s latest Health Cover UK Market Report, 17th edition states the same economic factors may increase company-paid demand for private medical cover as employers seek to retain staff. 

Authors, economist William Laing and former Bupa UK Insurance operations director Riko Scandelius make no short-term projections of demand but report sector sources indicating there was continued growth last year.

Their report says: ‘The deterioration of NHS waiting times and many other aspects of NHS services during and after Covid should, other things being equal, be a major factor boosting company-paid and individual demand for access to private healthcare through health cover products. 

‘But the lessons of recent history highlight the primacy of the state of the economy and consumer confidence rather than state of the NHS. 

‘With the UK apparently having entered into a phase of “stagflation” in 2022, albeit temporary, the immediate prospects do not look positive for that element of economic growth and consumer confidence which can support expansion of mainstream private health cover demand.’

Demand for UK private medical cover, as measured by subscribers to private medical insurance and enrolees in self-insured medical expenses schemes (healthcare trusts), rose marginally – 0.4% – in 2020, after 2.5% growth in 2019. 

Subscriber/enrolee numbers reached an estimated 4.1m at December 2020. Including dependents, 7.1m people had private medical cover – 10.6% of the UK population (12% in the early to mid-2000s). 2021 figures, when available, are expected to confirm further growth.

The authors believe ‘well-being’ is the one element of health cover, funded by employers, that appears to have the potential for transformative expansion in the medium term.

Whether it reaches its full potential depends on the capacity of largely online services to engage their audience and demonstrate real value to both employers and employees, they say. ‘For employers, the “holy grail” would be strong evidence of payoffs in containment of sickness absence.’