In 1943 American psychologist Abraham Maslow first set out his hierarchy of needs in which he outlined that people are motivated to achieve certain needs and that some needs take precedence over others.
Health features in the second most important need of security. And it seems that this was not lost on the incoming Labour government over in the UK in the aftermath of World War Two who set upon launching the National Health Service.
Fast forward 80 or so years and these are troubling times for the NHS which has been beset firstly by significant government funding cuts over the last decade, and then by a pandemic and more recently by industrial action over pay and conditions.
Consequently, individual private medical insurance is experiencing a boom in demand.
But whether this boom can be sustained in the future could rest on an array of ecomonic factors amid an intensifying cost of living crisis.
And advisers have also raised the issue of insurers maintaining service levels and the desire for covering pre-existing conditions.
Increased PMI enquiries
Latest data from NHS England revealed there were more than 7.3 million patients on waiting lists for treatment to be started in March – another record for the service – up from 7.2 million in January and 4.4 million in February 2020.
And earlier this year an Office for National Statistics (ONS) survey revealed millions of people in the UK have felt forced to go private to fund some or all of their treatment due to waits for NHS treatment.
According to Claire Ginnelly, health and wellbeing professional and vice chairwoman of the Association of Medical Insurers and Intermediaries (AMII), insurers and intermediaries are reporting increased enquiries for PMI.
“I believe the main driver for the demand is the current situation within the NHS,” Ginnelly told Health & Protection.
“We know the pandemic brought about a real focus on health and wellbeing and we saw increased interest as a result. This coupled with the long waiting times currently being experienced in the NHS is driving people to look at the private sector.”
Lack of access to GPs fuelling demand
The pandemic also drove increased demand for virtual GP services – a trend that is showing no signs of slowing down three years after the first lockdown.
Joanna Streames, owner of Velvet, reports these services are increasingly popular due to the lack of easy access to GPs currently.
“These are available alongside lower cost and more common policies such as life insurance which I think is still a bit of a secret,” Streames said.
“We have heard of more private GP services available for monthly subscription fees whereby you’re seen in a private clinic with a capped number of visits over a 12 month period.”
But the demand for virtual GP services also appears to reflect a change in behaviour over the way consumers would like to engage with healthcare.
While Axa Health has reported increased demand for its virtual GP services, it has also noticed growing consumer appetite for its other digital options.
The insurer told Health & Protection that it has seen a “significant” spike in the use of digital options, particularly its Doctor at Hand GP service.
It added that while pre-pandemic its number of Doctor at Hand appointments was in the region of 17,000 per month across all individual and employer customers, this is now around 50,000 per month.
In order to respond to this demand, the group has also introduced more digital options, particularly in areas of high customer demand such as musculoskeletal, mental health and GP appointments.
Call wait times and underwriting bugbears
But increased demand is not without its challenges for insurers in meeting their expectations, according to Marcia Reid, non-executive director at Sherwood Healthcare.
“As healthcare is becoming more significant within the hierarchy of needs, individuals seem more prepared to allocate more of their disposable income to private healthcare,” Reid said.
“We know that self-pay levels are increasing on an as-needed basis, but individuals are seeking the reassurance that healthcare insurance can provide too.
“Insurers have been challenged not only by the increase in demand generally but more importantly, the increase in claims.
“Call waiting times have been an issue and those insurers who were admitting a dip in service levels have responded by increasing recruitment to the helplines. Online claims authorisation is expanding which is a welcomed development.”
For Penny Jackson, owner of the Insurance Boutique, a growing bugbear has been increased delays in accessing medical reports from GPs.
“There are more delays with accessing medical reports from GPs, creating delays accessing private care,” she said.
“Providers need to implement new processes with self-declaration rather than waiting on these reports; longer wait times for customers will mean conditions are worsening and claims will end up costing them more in the long term.”
And Reid points out underwriting and exclusion for pre-existing conditions also continues to be an issue requiring advisers to manage client expectations, not only regarding their medical exclusions but also due to the changing healthcare environment.
“Although there are still significant advantages in seeking treatment privately such as choice of hospital, consultant and accessibility of treatment, the waiting times even in the private sector are increasing,” Reid continued.
“With a global shortage of anaesthetists, increased demand for self-pay ‘cold ’surgery and a spike in consultants retiring due to the previous pensions trap there is increased pressure on availability in the private sector.
“Medical and general inflation, plus increasing claims as fewer members can rely on the NHS will have a knock-on effect on pricing and we fear that premiums may increase accordingly,” she added.
Cost of living crisis implications
But even amid the threat of rising premiums and a cost of living crisis, advisers appear confident that increased demand for what is a relatively expensive benefit will continue.
“The issue with PMI has always been the cost,” Velvet’s Streames said.
“It is, of course, more expensive as you get older and the price cannot be fixed so it would seem unlikely this boom will continue at the current rate.
“However, it would seem we are heading to a two tier system currently with NHS there still – but with the second tier being taken by clients who have a higher income and I don’t see this fully reversing.”
But Streames added she believes the upward trend in demand for individual PMI will continue albeit more slowly if pricing sharpens.
“This will depend on many economic factors – the NHS offering, the UK economy recovery, increases in wages and so on,” she said.
“If there are improvements in outcomes with the NHS and public spending increasing here, then this will restore it somewhat and mean the boom could level out.
“Significant price increases once the cost of claims fully filter through will pay a key part also.”
PMI uptake to continue growing
Reid added she expects to see a “continuing upward trend” in take-up of private medical insurance for individuals.
“Group leavers enquiries are also increasing as members are loathe to lose the comfort that PMI cover has been giving them as a member of a corporate scheme,” Reid pointed out.
“Cover for pre-existing conditions continues to be an issue and the industry’s approach to underwriting deters many potential members from investing in private health insurance.
“I believe that some individuals would accept premium loading in exchange for enhanced cover for pre-existing conditions – in the same way that the cost of general insurance policies are currently loaded according to risk.
“There will continue to be an increased demand for support for preventative measures and wellbeing in general, and ultimately it is hoped that this will have an effect of reducing the cost of claims overall.”