Unchecked hospital fees, cost transparency and potential direct sales mis-selling are major concerns for advisers, hears Abigail Montrose.
Medical inflation has always been a factor in rising premiums, but it has been taken to a new level in recent years and intermediaries now expect premiums to rise by a minimum of 10% per year.
Advisers want to see more action taken by insurers to reduce charges by medical facilities and a focus on improving communication and transparency explaining large hikes.
And intermediaries at Health & Protection’s House of Lords roundtable also warned about the impact of moratorium underwriting for clients, particularly when poorly explained by insurers’ direct sales forces.
The cost of medical inflation led some significant concerns from the panel.
“I recently went with someone for a consultation and what used to cost £100 was £300, but everything is at least double the cost now,” said Paul Nugent, chief executive of Santé Group.
It is not just the private sector that is affected by medical inflation, commented Marcia Reid, non-executive director at Sherwood Healthcare.
“Medical inflation is an issue in the NHS too, let’s not forget this,” she said. “Medical inflation isn’t just driven by private medical insurance. It’s driven by the NHS and medical inflation is going up,” she said.
The cost of drugs is a major factor in pushing up medical inflation with estimations that around 70% of medical costs are for medication and these have been a significant source of increases.
Battling with facilities
But for Healthwell founder Chris Hughes the area of most concern is the private health facilities. He highlighted that while insurers negotiate standard pricing for treatments and practitioners, there is no standardisation of pricing with the private facility providers.
“Insurers focus on negotiating with the doctors and the anaesthetists and tell them how much they’re going to pay them,” Hughes said.
“But the facilities are owned by other providers and there is no control on what they charge.
“A family member went in for a 20-minute surgery recently at a private hospital. The surgeon’s fees were reasonable at £300 but the private facility charged £6,000 for the room.
“I went in and argued about the price and they dropped it to £3,000 immediately.”
These have become regular battles for Hughes as he negotiates with hospitals about the rates they are charging his clients.
“The thing is insurers are not negotiating with the facilities, they’re only dictating to the doctor that they can be on their list if they charge so much, that’s all they do,” he said.
Transparency and fairer pricing
While it’s possible to sometimes negotiate over charges or premiums, explaining this to clients can be tricky.
“Average increases in premiums for some of my clients have been 20% to 30%,” said Penny Jackson, owner of The Insurance Boutique.
“How do you explain that to someone who’s not claimed on their policy and they’ve got a 30% standard increase?
“I’ve gone back to the insurer to complain about this and they then give me a 15% discount. Why don’t they just give me that in the first place which would save us all a lot of time?” she said.
While the Financial Conduct Authority (FCA) is trying to encourage fairer pricing in the industry, this does not always work and can cause confusion and extra costs for insurers, according to Amy Wilson, head of insurance at The Right Mortgage & Protection Network.
“When the FCA brought out general insurance fair pricing they said everything needs to be fair and equal for customers, you need to be able to see what you’re paying for. And there are areas of the market that definitely needed that.”
But the panel noted that while well intentioned it had not always been smooth sailing during implementation and extra regulatory demands can also lead to higher premiums.
“Adding more layers of consumer duty, while important, also means adding more bureaucracy,” said Kristian Breeze, healthcare director at Ascend Broking Group.
“This is only ever going to trickle down to premiums, so costs will go up and customers are going to pay for this,” he added.
David Middleton, executive chairman of the Association of Medical Insurers and Intermediaries (AMII), agreed.
“There’s not enough explanation in terms of fair value from the insurers about why these increases have happened,” he said.
To try and get some clarity AMII is bringing together PMI insurers to understand what information they give to advisers.
“There are so many advisers coming to me and saying we’re not getting enough information to be able to give to our clients,” Middleton continued.
“They want to know why their premiums have gone up 30%. They know inflation is pushing up premiums but they want to know more,” he said.
Market forces
Advisers also detailed situations where premiums are artificially lower where an insurer is looking to increase its market share.
While this may seem attractive in the short term it can provide issues further down the line at renewal where policyholders may see huge premium increases.
This is where intermediaries can help, explained Reid.
“We have one insurer that wants to increase its number of registrations at present. Another year we’ll know they’re more concerned with their profitability,” she said.
“So we’re at their mercy when it comes to premiums, but at the same time, that’s what we’re here for.
“We can say to a client, this insurer is giving really good deals, we will do everything we can to mitigate the increase next year, but this is the best deal now,” she said.
Small claims, big problems
Surprisingly small claims can also trigger sharp increases if it flags up a health issue.
While the claim may only be for a small amount, if the health issue means the policyholder is now a higher risk, this will push up their premiums.
This can be difficult to explain to clients, said Jackson, as she urged the industry to rethink the way some claims are paid.
“I have a client who claimed on an NHS cash benefit,” she explained.
“She had an issue and was taken straight into an NHS hospital, she was happy with the treatment there and claimed £350 for it, but then her premiums went up £300.
“She couldn’t understand why this was so I had to explain it was because of the nature of her claim. It was a neurological claim and the insurer’s actuarial pricing on that claim made her a higher risk because she’d had an aneurysm.
“She said she was now absolutely fine, signed off and under the NHS and she was never going to claim for this treatment under her policy.
“But I told her, she had to look at the associated risks and the insurer will have data relevant to the nature of her claim. Unfortunately, that’s the way insurance works and this will have been priced into her renewal,” explained Jackson.
Confusion over moratoriums
After an apparent steadying of claims in 2023, 2024 saw fresh post-Covid highs.
Part of this can be explained by there now being more policyholders but there is also more activity.
Unfortunately, declined claims rose at three out of the four providers who reported these figures for Health & Protection’s Individual PMI Report 2025, with the key reasons being pre-existing conditions and moratoriums.
The panel agreed that moratoriums are confusing for customers and it is the adviser’s job to explain these carefully to clients.
“It just comes down to education; advisers are the first line of defence and they’ve got to roll their sleeves up and explain to clients exactly how moratoriums work and the potential pitfalls,” said Breeze.
But the panel noted that it did not help that descriptions vary between insurers.
“The description of a moratorium is different for each underwriter, there is no consistent underwriting for moratorium,” Hughes said.
And this was not helped by some consultants brushing over the details.
Potential mis-selling
“There’s a lot of consultants that will tell somebody to go moratorium, knowing full well that there’s certain things in there that are not going to be claimable going forward, but they don’t mention this because it’s an easy sell,” he added.
Jackson highlighted clients who do not realise they have bought a moratorium-based policy which will exclude pre-existing claims.
“There’s a big issue with people understanding what they’ve bought, particularly from larger call centre operations,” she said.
“I fear they are not explaining the moratorium and then people go to claim and get rejected.”
There were also serious concerns raised by several panellists about direct sales completed by insurers.
Both Jackson and Hughes cited examples where clients had received quotes from insurers believing it was for full coverage including chronic and pre-existing conditions, but instead it was for moratorium policies.
“That’s a real big problem, because no one’s really actually looking at the underwriting, they’re just checking the premium and their date of birth,” Jackson warned.
Claims on moratoriums may also be going up because people don’t fully explain their health niggles or see doctors for them.
“There are loads of people who are living with things they don’t see their GP about. They may have back pain but just take ibuprofen every day,” she continued.
“They haven’t sought advice for this or told their GP about their symptoms so there’s nothing on the GP report when they need treatment. So effectively they can go and claim on a moratorium, which is probably why claims are increasing,” she added.
Understanding pathways
Another reason for claims being declined is people not understanding what pathway or which specialists their policy covers them for.
“I had a case recently which goes back to pathway. The client said they did not realise they had to use particular GP or consultant or orthopaedic surgeon,” said Nugent.
Using PMI appropriately can help keep premiums down and the panel agreed it needs to be seen as an insurance policy to be used for serious events, not as a pre-paid healthcare plan.
Ultimately avoiding unnecessary treatments and asking if something really needs a diagnostic or a private doctor will help address this too.