Five years on from a global pandemic, employers appear to be continuing to carry the can when it comes to improving the health and productivity of UK plc’s workforce.
But this has come at a significant cost.
While the general consensus is group private medical insurance (PMI) premiums have increased at around 20% on the previous year, a director at one managing general agent has heard reports of rises of more than 100%.
Such cost increases means there is now no such thing as a straightforward renewal for advisers as employers increasingly want more bang for their buck.
But the good news is while more cost effective solutions such as pathways are being explored and with advisers having to be transparent on why premiums are rising, employers appear to be holding fire on cancelling schemes entirely for now.
Inflationary pressures and post-Covid backlogs
“There’s been a perfect storm of inflationary pressure, post-Covid healthcare backlog, record-high NHS waiting lists, and a renewed demand for mental health services,” Kristian Breeze, director of healthcare at Ascend, tells Health & Protection.
“Hospital providers are passing on higher labour and treatment costs. Claims inflation is now running at 12%, with more frequent and costlier claims—particularly in diagnostics, oncology, and orthopaedics—cited as core contributors,” he added.
And Breeze maintains that while just two years ago, employers could just about absorb a 5% to 7% increase in premiums, in 2025, that buffer is now gone.
“This is now boardroom-level concern,” he added.
Renewal terms of over 20%
In terms of the premium increases advisers are seeing out there, the general consensus is this is at around 20%.
Chris Beardshall, health and benefits director at Willis Towers Watson, tells Health & Protection: “Premiums for group private medical insurance (PMI) are seeing significant year-on-year increases, often in the double digits.
“Some employers are facing renewal terms over 20% especially for plans with high claims exposure or older demographics.”
Marcia Reid, non-executive director at Sherwood Healthcare, agrees, adding her firm is seeing an average premium increase in excess of 20%.
“This seems to be slightly lower than last year and I wonder if the ‘post-Covid bounce’ has now settled down,” Reid continues.
“However, as the NHS challenges continue, claims incidence is only going to go in one direction – upwards – I suspect.
“Some clients have faced non-negotiable increases as high as 90% , mainly due to ongoing high claims and increased claims incidence. This is particularly difficult for SMEs as one high claim can have a major impact on premium.”
Premiums going up by more than 100%
Though for some employers the situation is even worse as Gavin Shay, distribution director at Equipsme, points out.
“There must be few other industries where a client would be expected to swallow 30-50% price increases year after year,” Shay says. “I’ve heard of premiums going up by more than 100% – clearly that’s not sustainable.
“And it’s little wonder businesses are going back to the drawing board on benefits – and back to their brokers.”
Bang for buck
Shay added that the company has achieved its price point and sustainability through community pricing – and by making firm and transparent choices about what it covers.
“We have consciously removed cancer treatment and focussed instead on early diagnosis and fast-track pathways for both oncology and other common diseases,” Shay continued. “The fact is more people are out of action through MSK issues than cancer. What we’ve done from the start is listen to the customer. And what the customer wants is real, usable benefits that get more of their workforce better and back to work faster.”
Shay added that the industry needs to manage clients/customers’ expectations better, and price the risk accordingly – and fairly.
“What I’m still seeing in this high-inflation environment are some exceptionally low prices for new-to-market opportunities, then the price hiked at future renewals,” he continued. “That could cause one hell of a price shock for the unwary. The wary – probably those with reliable employee benefit brokers – are going to have an eye on sustainability, and should be asking for proof that they’re getting actual bang for their buck.”
Challenging assumptions
But it is not just down to employers themselves to challenge these premium increases.
Kevin O’Neill, associate and head of workplace health at Barnett Waddingham, tells Health & Protection it is important to challenge the assumptions behind a provider’s claims fund and overall premium calculations.
“At Barnett Waddingham, we utilise actuarial analysis to review claims experience, the membership profile, and scheme design to provide more accurate models,” O’Neill adds.
“This approach can lead to significant savings — some of our clients have achieved savings of approximately 15% or more in 2024, without compromising future sustainability compared to insurers’ initial renewal rates.
“Conversely, our analysis can confirm whether the insurer’s proposed funding levels are set correctly.”
No such thing as a straightforward renewal
Mike Hesch, head of UK employee benefits at Engage Health Group, maintains there now appears to be no such thing as a straightforward renewal, adding Engage completes full market reviews as standard.
“We are often having to do three to four rounds of negotiation with the market and holding providers to ensure we absolutely have the best and final quotes,” he continues.
“We are then obtaining multiple alternative quotes showing cost savings that could be achieved by changing cover, for example, different hospitals, excesses and, as a last resort, reduction of the cover offered.
“We have seen more cancel benefits this year and they are citing overall increased business costs as the driver, but the majority do value the benefit and are keeping their cover and either renewing on discounted terms, implementing cost containment measures or moving providers.
“We do have a concern that if we see a second year of high increases that we will see a much larger number of cancellations, as for many there will not be much more we can do to help them reduce cost.”
Importance of pathways
But pathways also have a role to play to bring down costs for clients, according to Audrey Spence, director at Incorporate Benefits.
“I think such pathways remain important to the individual, and most likely play a role in cost limitation for insurers,” Spence says. “I believe we will soon need to enter an arena where all insurers can accommodate co-funding of employee premiums to avoid cancellations.”
Though Rachel Western, health and risk principal at Aon, points out this cost saving device is often underused.
“They hold a place in enabling quick access to certain pathways but are underutilised by most,” Western says.
“Making pathways more mandatory can help drive this but again data insights that enables clients to make informed decisions on where to direct their strategy to longer term manage risk is becoming more important,” Western adds.
Smarter usage and online outpatient services
But pathways are not the only solution at an employer’s disposal to bring down costs, Dave Booth, sales director at Santé Group, says.
“We’re also seeing more employers invest in health management tools, wellbeing programmes, and education to help employees understand and make the most of their benefits,” Booth continues.
“Smarter usage reduces claims and helps ease cost pressures in the long run,” Booth adds.
“Santé Group have recently launched a new product to the market called Santé Care, which addresses this issue by offering a nurse-led concierge service targeting the uninsured and underinsured.”
Though such innovation is not limited to employers as insurers are equally aware of the pressure employers face and are responding in kind.
“Our online outpatient services are one example where we are delivering customer focused health journeys which present both positive outcomes and cost management benefits,” Ali Hasan, commercial director, Axa Health, tells Health & Protection.
“Private healthcare remains a sought-after benefit and many clients are looking to broaden their range of benefits and offer more to support the health of their teams.
“However, we acknowledge that some companies may need to consider different options to manage costs.”
Switch pricing
Aggressive switch pricing is also an area being explored – though this comes with its own set of issues, according to Steve Ellis, joint managing director ‑ corporate services at Prosperis.
“Aggressive switch pricing can lead to first year losses and insurers then need to recoup the set-up costs including enhanced first year commissions,” Ellis says.
“Can more insurers consider a two-year rate period with commission uplift paid over the extended term?
“Constant switching only delays the inevitable and over time makes schemes less attractive.”
No widespread cancellations
Though employers are mindful of costs, insurers do not appear to be experiencing widespread cancellation of plans as Ally Antell, distribution director at Aviva UK Health, tells Health & Protection.
“We’re not seeing widespread cancellations,” Antell continues. “In fact, most employers are doing everything they can to retain their private medical insurance scheme.
“The focus is on adapting cover and plan structures to ensure long-term sustainability. Retention across Aviva’s corporate healthcare portfolio remains very high in 2025, with strong new business growth.”
And Antell points to several ways to address rising premiums.
“Employers can consider more tax-efficient options like Corporate Excess or Trust products, or adjust hospital lists to guided care models—reducing costs without compromising treatment access,” Antell adds.
“It’s also important to structure schemes sustainably. For example, plans that allow self-funded cover with Medical History Disregarded underwriting may see a greater level of claims and a higher level of premium increase over time, than a scheme that has chosen a different underwriting option or has opted for a member excess to help control cost.”
Early intervention
Focusing on early interventions can also help employers guard against conditions worsening so they result in a claim.
Debra Clark, head of wellbeing, Towergate Employee Benefits, says: “Once you know what is causing people to claim you can then be focused in trying to move to a proactive approach and preventing things from escalating into claims.
“This can be through wellbeing awareness and education.
“Some of the group risk and cash plan products include services that can help this, meaning employees can still get support but without it hitting the PMI claims,” Clark continues.
“Experience shows that by making better use of these elements of other products, employers could save money longer term,” she adds.
“Employers could also use screening to catch things early,” Clark says.
“Preventing or catching issues earlier and showing employees a different way of using all their benefits and not just going straight to the PMI, will all help.”
Huge opportunity
And according to Dr Arun Thiyagarajan, CEO of Vitality health insurance, businesses have a “huge opportunity” where they take steps to not just manage employee health and its productivity fallout, but positively improve it.
“Furthermore, since the pandemic we have seen employees want more health and wellbeing support from their employer and they are actually happy to surrender more of their own responsibility to get it,” Thiyagarajan continues.
“This means that companies that offer the right support, are likely to find their retention boosted further on top of the value health insurance already provided.”
The winners of tomorrow
But for Breeze there is no single solution to tackle the issue of rising premiums.
“The industry must push harder for pricing transparency, risk pooling innovations, and employer education,” Breeze says.
“We need to stop treating PMI as a static annual cost and start treating it as an evolving people risk strategy.
“Advisers must arm clients with data, not just renewal figures,” he continues.
“Insurers must offer better tools to manage claims. Employers must realise that cancelling a plan may save costs short-term but undermines workforce stability long-term.
“The divide between businesses that continue to invest in employee health and those that don’t will only widen.
“And in today’s labour market, that difference could define the winners of tomorrow.”
