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PMI premiums up as costly claims Climb

A new report by Datamonitor has found the cost of private medical insurance in the UK is rising as increasing numbers of ageing policyholders make claims.

Research by the market analyst shows escalating claims by elderly customers and static market conditions are combining to increase the cost of premiums to an extent which leaves many people unable to afford PMI.

It points to the decline in the number of individual policyholders while group PMI sales have risen over the past five years. Between 1995 and 2000, Datamonitor says the number of group PMI schemes increased from 1.8 million to 2.3 million while individual plans fell from 1.3 million to 1.2 million.

It says the low levels are exacerbated by factors including consumer uncertainty over state initiatives, expensive premiums and ignorance over the cost and funding of long-term care. But it claims the overriding concern for the PMI market is that the number of individuals covered has remained roughly the same for the past five years. Only 200,000 more people held PMI last year than in 1995,an increase from six million to 6.2 million.

Datamonitor says health insurers need to modernise products and marketing to boost PMI uptake among consumers who are concerned at paying high premiums for insurance they believe they are unlikely to need.

Financial services analyst and report author James Allingham says: “The only way that health insurers can significantly improve customer acquisition, particularly in the individual market, is through the development of cheaper and more tailored products.

“To acquire the younger spectrum of potential PMI customers, insurers need to put these products on modern distribution platforms, such as the internet and interactive television.”

PMI market, p53

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