UK Healthcare Cash Plans 2010

Introduction

This brief provides a detailed investigation into the UK healthcare cash plan market, with information on market size and profitability, as well as developments in policy numbers. In addition, the size of the market is forecast up to 2014. The brief also discusses consumer and distribution trends in the market, identifying the consumer segments most likely to buy insurance.

Scope

*Data on market size, product penetration and consumer attitudes to healthcare cash plans.

*An analysis of the latest innovation and market developments taking place.

*Forecasts of premium income until 2014 and an examination of the factors influencing future market growth.

Highlights

While the private sector bore the brunt of the recession in 2009, a number of analysts have pointed to possible reductions in the public sector through large-scale redundancies. This is likely to have a negative impact on healthcare cash plan providers distributing through this sector, due to an expected reduction in headcount.

The corporate market is an attractive target for healthcare cash plan providers due to the rapid growth it can bring to their business. Many cash plan providers have therefore been focusing on distributing their policies to employers in a bid to gain access to a large pool of risks and therefore increase revenues.

A number of consumers and companies are seeing healthcare cash plans as a good alternative to PMI, which can be considerably more expensive. Industry executives interviewed by Datamonitor stated that increases in premiums in the PMI market had encouraged more companies and consumers to seek cheaper alternatives such as healthcare cash plans.

Reasons to Purchase

*Understand product penetration trends across different customer segments in the market.

*Benchmark your market share and premium income against your competitors.

*Develop your future market strategy using Datamonitor's unique forecasts.


Report Highlights
While the private sector bore the brunt of the recession in 2009, a number of analysts have pointed to possible reductions in the public sector through large-scale redundancies. This is likely to have a negative impact on healthcare cash plan providers distributing through this sector, due to an expected reduction in headcount.

The corporate market is an attractive target for healthcare cash plan providers due to the rapid growth it can bring to their business. Many cash plan providers have therefore been focusing on distributing their policies to employers in a bid to gain access to a large pool of risks and therefore increase revenues.

A number of consumers and companies are seeing healthcare cash plans as a good alternative to PMI, which can be considerably more expensive. Industry executives interviewed by Datamonitor stated that increases in premiums in the PMI market had encouraged more companies and consumers to seek cheaper alternatives such as healthcare cash plans.
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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The recession has presented healthcare cash plan providers with an opportunity to increase gross written premiums 2
The market demonstrated resilience in the recession 2
The healthcare cash plans market is an attractive sector to operate in 2
A high degree of product innovation will ensure future survival of the product 3
Cancer cash plans and hybrid policies are growing in popularity 3
Targeting the young remains a challenge 3
Modest growth is forecast for the market 4
Healthcare cash plans will remain an attractive alternative to PMI 4
Table of Contents 5
Table of figures 6
Table of tables 7
Market Context 8
Introduction 8
The UK healthcare cash plan market witnessed GWP reach £570m in 2009 8
Healthcare cash plans differ from PMI by paying out set amounts 8
The cash plan market has been resilient in the recession 8
Cash plans are an appealing alternative to PMI 10
Premium rates increased marginally in 2009, roughly in line with claims inflation 10
Membership to the Health Insurance Counter Fraud Group will help reduce fraudulent claims 10
Healthcare cash plan providers are seeing good returns on their business 10
Some have turned to reserve releases in order to strengthen performance ratios 11
Implementing Solvency II will be a challenge for many cash plan providers 12
Mutuals will find the capital requirements set out by Solvency II too onerous 12
Cuts in the public sector may affect future growth in the market 12
Customer Focus 13
Introduction 13
There is a high degree of product innovation in the market 13
Cash plans are a useful and popular way for companies to improve their employee benefits 13
Players are re-vamping their products to appeal to corporate clients 13
Dental and optical cover remain highly sought after by consumers 14
Paycare now caters for customers who have been made redundant 14
Cancer cash plans and hybrid policies are growing in popularity 14
7% of UK consumers hold a cash plan, most of which are over the age of 35 15
PMI is the most common type of healthcare insurance held by UK consumers 15
Young consumers are less likely to purchase a healthcare cash plan 16
Hybrid policies should be targeted at those with high incomes 17
Penetration rates between PMI and healthcare cash plan policies vary among higher social grades 18
Simplyhealth is making a big push through advertising in 2010 19
Simplyhealth now includes the HSA, BCWA, LHF, HealthSure and Totally Active brands 19
Simplyhealth is successfully building brand awareness in the market place 19
Total advertising spend on healthcare cash plans increased by 29.8% in 2009 20
TV advertising accounted for the largest marketing spend in 2009 21
Simplyhealth was the largest spender on advertising during 2009 22
Competitive dynamics 25
Introduction 25
The rise of corporate products has allowed brokers to pave their way into the market 25
PMI insurers are moving into the cash plans market as profits decline in the PMI market 25
Healthcare cash plan providers are focusing their efforts on targeting corporate clients 25
Brokers have become a powerful force in the market, particularly in the corporate market 25
Aggregators are unlikely to grow their presence in the cash plan market 25
HSF and Chartis have experienced strong growth in the economic downturn 26
The market leader Simplyhealth grew its business in 2008 26
Westfield Health Insurance witnessed growth during 2008 26
Chartis experienced double digit growth in 2008 26
BHSF grew its premium income significantly following the acquisition of Cash4Health in 2008 26
HSF witnessed significant growth to its business in 2008 27
Medicash witnessed a slight reduction in GWP in 2008 27
Personal Assurance witnessed its premiums grow to £16.2m in 2008 27
Munich Re's GWP fell significantly in 2008 27
Future Decoded 29
Introduction 29
The corporate paid sector will be a fundamental factor driving market growth 29
NHS cutbacks and increases in corporate paid GWP will be key factors influencing market growth 29
GWP in the healthcare cash plan market is forecast to reach £652m by 2014 29
Appendix 33
Definitions 33
Premium income measures 33
Earned premiums 33
Gross premium 33
Net premium 33
Written premiums 33
Other definitions 33
Channel 33
Direct insurer/writer 33
Brokers 33
Bancassurers 33
Brandassurers 34
Platform 34
Reserves 34
Further reading 34
Ask the analyst 34
Datamonitor consulting 34
Disclaimer 34
List of Tables
Table 1: UK healthcare cash plans GWP (£000s), 2007-09 9
Table 2: Accident year gross loss ratios in the UK healthcare cash plans and PMI markets (%), 2005-08 11
Table 3: Top 10 UK healthcare cash plan advertisers (£), 2005-09 21
Table 4: Advertising spend of the top 10 healthcare cash plan advertisers (£), 2009 24
Table 5: Top 10 healthcare cash plan insurers by GWP, 2005-08 (£000s) 28
Table 6: Forecast of GWP in the UK healthcare cash plans market, 2010f-14f (£000s) 31
Table 7: Key variables affecting healthcare cash plan GWP, 2010-14 32
List of Figures
Figure 1: Gross loss ratios are closing between PMI and healthcare cash plans 3
Figure 2: Penetration rates for healthcare cash plans are low compared to PMI 4
Figure 3: GWP displayed resilience amidst the recession, reaching £570m in 2009 9
Figure 4: Gross loss ratios are closing between PMI and healthcare cash plans 11
Figure 5: BHSF's Plan4Life cancer insurance will pay up to £24,000 in the event of a cancer diagnosis 15
Figure 6: Penetration rates for healthcare cash plans are low compared to PMI 16
Figure 7: Penetration rates are highest among consumers aged between 45 and 54 17
Figure 8: PMI policies are more common than healthcare cash plans among the affluent 18
Figure 9: Healthcare cash plans appeal more to consumers belonging to lower social grades 19
Figure 10: Spending increased significantly in the market in 2009 20
Figure 11: In 2009, almost two thirds of total market advertising spend went towards TV advertising 22
Figure 12: Simplyhealth was the largest spender on healthcare cash plan advertising in 2009 23
Figure 13: Simplyhealth was the leading healthcare cash plan insurer in 2008 28
Figure 14: The healthcare cash plan market is expected to experience modest growth between 2010 and 2014 30

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