PRIVATE MEDICAL INSURANCE DEVELOPMENTS

1
PRIVATE MEDICAL INSURANCE - DEVELOPMENTS
The Actuarial Profession
making financial sense of the future

• The 2002 Healthcare Conference
• University of Warwick, 29 September - 1 October
  2002
• Neil Hilary

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Ha PMI to discuss PMI

• Framework The decision to buy PMI
• The State
• The insurers
• Over to you

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The Decision Framework

• Why buy PMI?
• The NHS is getting worse!
• I want my own doctor
• My brother had a terrible time in the local Trust
• I dont want (cant afford) to wait
• I want hotel accommodation
• I can afford to pay

4
The Decision Framework

• What puts me off buying PMI?
• The NHS is getting better!
• PMI is too expensive
• What will I be paying in two years time?
• There are too many exclusions
• I have to clear everything with them first
• Why should I pay twice for healthcare?
• Private healthcare is morally wrong

5
The Decision Framework

• The buying public is looking closely at
• The NHS and government commitments
• The private sectors insurance alternatives
• The stability of the pound in his pocket

6
The State and the NHS Plan

• To provide a personalised service offering the
  standards that patients expect and staff want to
  provide
• Change on this scale will take a long time as we
  expand and develop the NHS
• Overall vision is to create a service designed
  around the patient or user - this will require
  investment and reform
• Must focus on better treatment and care, faster
  and easier access

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The State and the NHS Plan

• By end 2005, reduce max outpatient wait to 3
  months and max inpatient wait to 6 months
• Patients to receive treatment at a time that
  suits them in accordance with their clinical
  need 100 pre-booking by end 2005
• Improved clinical quality across primary and
  secondary care
• Improved standards of accommodation, cleanliness
  and food (24hr food service)

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Delivering the NHS Plan

• 15,000 more GPs and consultants, 30,000 more
  therapists and scientists, and 35,000 more
  nurses, midwives and health visitors
• Explicit patient choice (Scandinavian system)
• Patients have info on alternative providers, to
  switch to hospitals with shorter waits
• Hospitals locally or elsewhere, diagnostic and
  treatment centres, hospitals private or overseas
• Use private providers where they genuinely
  supplement capacity of NHS and offer value for
  money - expanding choice and promoting diversity
  in supply, particularly for elective surgery

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Delivering the NHS Plan

• Healthcare should be available on the basis of
  need, not the ability to pay
• Any capacity used in the private sector must
  augment, not subtract from, the number of
  precious skilled clinical staff already working
  in the NHS
• Recognising that the private health provider
  sector in the England is relatively small,
  overseas providers of healthcare will be brought
  into the country - with their own clinical teams
  - to establish services for the NHS

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The Insurers Response

• Market environment
• tighter financials in recessionary mindset
• no further consolidation (QBE, Iron Trades?)
• view of NHS at least no worse
• internet players
• sales regulation from 2004

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The Insurers Response

• Market statistics 2001 (Laing Buisson)
• Subscribers 3.71m (up 1)
• Persons covered 6.66m (down 3)
• Premium revenue 2,657m (up 8.2)
• Claims incurred 2,066m (up 6.4)
• Penetration 11.1 of UK pop (down from 11.5)
• Less than one-third is individual
• 57 through intermediaries
• No major changes in statistics expected in 2002

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Product Responses

• Move to increasing excesses
• Reduce premium(old)
• Discourage small claims (old)
• Encourage use of NHS (old)
• Now serious alternative product to enable
  individuals to manage their own risk (new)
• 5,000 pa excess can reduce premium by 80
• Lifetime excess of 5,000 -gt then fully covered
• Excess per claim may mislead

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Product Responses

• Move to guaranteeing premiums
• 10 annual increase is still with us and very
  much a factor in the lack of growth in individual
  sector
• One major player now offers 5 and 10 year gtees
• Premiums rise only after 5th or 10th renewal
• But to what level?
• Differential is probably too high for purchaser
  .
• . but too low for the actuary
• Combined with excesses to disguise impact
• Investment? Reserving?

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Product Responses

• Other Variations from the Traditional
• No age-related premium increases
• NCDs
• NHS waiting list plans
• You pay a proportion of total costs up to a max
• Risk assessment based on lifestyle, occupation,
  age and location
• Include more (e.g. CIC, travel, savings element)
  -gt expensive enough already?
• Combination of PMI and Cash Plan (in NHS)
• Preferred provider arrangements (e.g. paybeds)

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The Future (is on Orange, not red nor green?)

• How many of their ambitious targets will the NHS
  achieve?
• Will this remove PMI as a viable alternative?
• What does the public really want as choice?
• Are insurers moving in the right direction?
• Are we seeing innovation or merely tinkering?
• Can reinsurance or derivatives help?
• Do we have to wait for the Govt to admit that
  they cannot fund acute healthcare alone?
• Can insurers survive without own hospitals?
• Is the future in internet sales?

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PRIVATE MEDICAL INSURANCE - DEVELOPMENTS
The Actuarial Profession
making financial sense of the future

• The 2002 Healthcare Conference
• University of Warwick, 29 September - 1 October
  2002
• Neil Hilary