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Private Medical Insurance - Strategic Considerations. John Gillman. ‘ Living strategy and the death of the five-year plan: is strategy dead? ’ No, but strategy needs to be different! Source: Financial Times 27 October 2009. The hedgehog approach: corporate

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Private medical insurance strategic considerations

Private Medical Insurance - Strategic Considerations

John Gillman

Living strategy and the death of the

five-year plan: is strategy dead?’

No, but strategy needs to be different!

Source: Financial Times 27 October 2009

The hedgehog approach: corporate

hibernation only works if recessions are


  • BCG: Organisations with adoptive advantage recognise the unpredictability of today’s environment and the limits of deductive analysis. They ……

  • Process relevant data quickly

  • They see clearly how their business fits into a wider context

  • They are alive to social change and shifting customer preferences

  • They experiment effectively

  • They draw on the talents of the best people they can find – whether they employ them or not


‘You have to give up the pretence that you can

predict the future’

‘Strategy is really an evolving idea which develops

over a long period on a long and winding road

.… and this new world calls for just-in-time

decision making’

While the eternal truths - market position, scale

and capabilities – endure, a more dynamic and

adaptive approach is now needed.

Review of 2008/2009

  • Total people covered was 7,562,000 – 12.3% of the U.K. population with individuals the main contributors of market growth

  • PruHealth’s business grew by over 50%

  • AXA/PPP’s business added nearly £90m in premiums

Review of 2008/2009

  • Simply Health’s market share grew to 2.5%

  • Standard Life marketed heavily in 2008 (but lost market share)

  • The top 10 advertisers are focusing on direct mail

  • Top 5 competitors

BUPA, AXA/PPP & Aviva control > 75% of the market

Standard Life down slightly

WPA market share down

What was the main reason you purchased PMI? %

  • Part of our financial planning 20

  • I consider it a financial priority 14

  • Death or illness of family friend persuaded me 9

  • Bought it with mortgage/loan 4

  • Persuaded by a salesperson 3

  • Other 46

    Source: The Hannover Re (UK) Protection Review Consumer Survey 2009

Why did you purchase – then and now?

  • Jumping the queue

  • Choice of specialist/surgeon

  • Hotel facilities

    Now added:

  • Fear of hospital acquired infections – AXA PPP 2009 Research

  • Cost of new drugs

Why didn’t you buy PMI?


  • Can’t afford it 37

  • The State will look after me 18

  • I haven’t thought about it 16

  • Other priorities 6

  • I don’t trust insurers to pay claims 6

  • Other / don’t know 17

    Source: The Hannover Re (UK) Protection Review Consumer Survey 2009

PMI Market share by subscription income 1992 – 2007

1992 % 2007 %

  • BUPA 44 42

  • AXA/PPP 28 24.5

  • Norwich Union 3.5 10

  • Standard Life 3 7.5

  • Cigna 3 3.5

  • WPA 5 3

  • Simply Health n/a 2.5

  • PruHealth n/a 2

  • Exeter Friendly <1 1

  • CS Healthcare <1 0.5

    Source: Laing’sHealthcare Market Review 2008/2009

Protection Insurance Adviser’s Forecasts

For the next 12 months

  • Write more 43.9%

  • Write less 7.4%

  • Write the same 48.7%

Source: Protection Review, 985 PFS members responding to an e-mail questionnaire April 2009

Tax Relief: Research among

Members of Parliament

  • Conservative: 49%

  • Labour: 1%

    Source: BMI Healthcare Research 2009

    Sample: 44 members

Tax relief or tax incentives?

New funding models must pass the test of


Efficiency: will the proposal achieve its proposed

end and provide the greatest possible

improvement and healthcare within the funding


Equity: how will the proposal match financial

contributions to ability to pay, and how well would

it match healthcare to health needs?

Should tax incentives be offered to

individuals and employers?

The efficiency test fails it in four respects:

  • Its effects are likely to be minimal without a strong level of compulsion

  • It diverts funds from the public healthcare system

  • It does not save the public sector money

  • It would inflate healthcare costs

It fails the equity test:

  • Its uses taxpayer funds to expand two-tier access to healthcare

  • It shifts the burden of paying for healthcare from the healthy, young and wealthy to the unhealthy, old and poor

Wellness v the national illness service

Health & Wellness

Will ‘wellness’ provision become an integral

part of private medical insurance offerings?

The health and wellness approach

‘The principle of risk pooling means that

people who are healthy, fit and well don’t

see good value for their premiums. We see

rewarding people for taking care of

themselves as the key to breaking

through this and focusing on improving and

maintaining health as the mechanism’

Source: Mark Noble, Aviva, quoted in the 2009 Protection Review

The health and wellness approach

‘The message is definitely getting across. Half

our policyholders agree that our unique Vitality

incentive programme has helped them to be



The health and wellness approach

Vitality – which rewards our policyholders for

participating in healthy activities – is an even more

applicable model in this difficult economic

environment because the value of the incentives

and the rewards it provides means more’

Source: Shaun Matisonn, PruHealth, quoted in the 2009 Protection Review

Is the risk of needing to pay for parents’ long

term care something you think about?


Yes, it is a major concern 17

No, they have funds to cover it 20

No, they can use house equity 10

No, the State will look after them 5

Other/don’t know 15

Not applicable (parents deceased) 32


  • Subscribers will fall in the short term

  • Growth will resume between 2011 and 2013 (but more slowly in the group market)

  • PMI usually rides out recessions quite well since it is considered an essential purchase

Business development – what the

commentators say

  • Look out for more cancer drug top-up policies

  • Retention activity is more important than ever

  • Direct distribution is key to the individual market, but

  • Marketing via employers has a part to play

Business development – what the

commentators say

  • Lower costs are needed to bring in customers

  • Adequacy of care for the over 60s is an issue

  • The NHS 18 week waiting time target is still seen as too long

  • Intermediary involvement may increase

Opportunities for the PMI market

  • Difficult to envisage the NHS getting all the resources it demands

  • Development of products that meet a range of perceived needs in partnership with culturally acceptable other providers

  • Public sector pensions and the emergence of flex plans?

  • Excesses, co-pays and ‘deposit’ plans for a wealthier baby-boom clientele

  • Government policy and the ‘Nudge’ strategy


Opportunities for the PMI market

  • Demographics and the ‘worried well’

  • Will the competition be slow to move?

  • Will ‘wellness’ be the new trend?

  • Emergence of more specialised and better qualified advisers

  • Marketing through employers – Flex and voluntary plans

  • Aggregate sites


  • NHS waiting lists are effectively addressed

  • The recession lingers and bites harder

  • Competitors launch a ‘killer’ product aimed at market segment

  • Slow attrition as members age and premiums increase



  • Development of new expensive drugs and treatments

  • Emergence of more specialised and better qualified advisers

  • Competitors throw even more resources at distribution in a static market

Key Performance Indicators 2014

  • Customer satisfaction – ‘very satisfied’ is the only really safe place. Listening to ‘the voice of the customer’ is even more critical and should drive product design. They need to know you value them even if they do not claim

  • New member growth – what part will advisers and employers play in this objective. Is entering the group market feasible?

  • Operational efficiency – essential, but remember that only claimants will know how great you are


Key Performance Indicators 2014

  • Financial performance – the ‘early warning system’ is important

  • Positive staff contribution – empowerment and the correlation between staff satisfaction and customer satisfaction

  • Regulatory and governance – regulatory best practice is often just good business practice

Is the future friendly?

  • Yes, as long as we remember that it starts right now!

Find out more at

Find out more at