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Creaking at the Joints — Both the Over-Burdened NHS and the UK’s Ageing Population Help Medical and Health Insurance Market Through Spending Cuts and Recession

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This Key Note Market Assessment, Health & Medical Insurance, looks at the total market for health and medical insurance products in the UK. The report breaks down the market into two sectors: long-term medical and health insurance (including but not limited to income protection insurance; critical illness insurance; and long-term care insurance) and general medical and health insurance (including but not limited to private medical insurance [PMI]; hospital and medical cash plans; personal accident insurance; and mortgage repayment protection insurance).

Close to a fifth of all adults surveyed in market research exclusive to Key Note stated that they had suffered an illness or injury which prevented them from leading a normal life for at least 3 weeks in the 12 months prior to the survey (April 2012). This was coupled with statistics from the Department for Work and Pensions (DWP) which revealed that, as of May 2012, some 7.3 million people in Great Britain were claiming some form of disability or illness allowance from the Government. This is against a backdrop of an ageing population, with the number and percentage of the population consisting of those aged over 85 rising rapidly over the past decades, with predictions from the Government showing further, steeper increased up to 2035. With rising life expectancy comes a decline in healthy life expectancy (the percentage of years one can expect out of one's life to be spent in good health) as the population ages.

These factors -- alongside a rising rate of cancer diagnoses, a growing population and spending restrictions and cuts from the incumbent Government -- have amassed to place great pressure on the NHS in terms of both budgetary demands and an ever-growing volume of patients. The cost of treating illness rises as new innovations in certain medicinal fields become available.

The NHS, however, remains a free-at-the-point-of-care treatment facility for those who need it and thus health and medical insurance can be seen as a 'double insurance' as there is already the guarantee of provision of care from the state. Therefore, the recession has hit the market, in that health and medical insurance is a 'luxury' insurance product which is also being cut as a 'perk' for some employees as employers try to save money. This said, the aforementioned budgetary pressures on the NHS due to the recession are likely to lead to longer waiting lists, which in turn may lead to patients being more willing to take on private medical insurance policies, especially to cover operations such as joint replacements, which will become increasingly common thanks to the abovementioned ageing population. As private medical insurance is one of the most important sectors of the total health and medical insurance market, this is good news for the market's total value.

According to the Association of British Insurers (ABI), the number of people covered by PMI has fallen over the past 5 years, from 6 million to 5.5 million. However, despite this, gross earned premiums for insurers have increased by 5.7% over the same period, indicative of the rising cost of medical treatment.

The health and medical insurance market has experienced difficulties over the past 5 years, but it is a diverse sector with many different subsectors, something which has provided it with a certain degree of buoyancy despite the recession. The underwriting result for health insurance has been positive across the past 5 years, when many other sectors of the insurance market have seen a negative result for at least one of the years. The diversity of the sector and the change in demographics are likely to provide it with a strong footing to prosper, at least in the medium term.

View the FREE Executive Summary & Table of Contents for Medical & Health Insurance Market Assessment 2012