Special report: SME PMI

  • Tuesday 06 September 2011

Standard Life Healthcare was the UK’s fourth-largest private medical insurer, with an 8% market share and 490,000 members. At the time the acquisition created the UK’s fourth largest PMI provider, with a customer base in excess of 700,000 lives and premiums of approximately £400m.

March 2011 – Westfield Health acquires PatientChoice

Britain’s second largest cash plan provider acquires the specialist hospital treatment plan provider.

June 2011 – AXA PPP healthcare announces intention to acquire Health-on-Line

Britain’s second largest PMI provider already underwrites Health-on-Line products

August 2011 – Simplyhealth agrees to acquire Groupama Healthcare

The deal, set to be completed in the next three to six months, adds 4,500 schemes and 88,000 members to Simplyhealth’s customer base. The cash plan and PMI provider will become the fifth largest player in the PMI market following the acquisition.

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WHY ARE COSTS RISING?

PMI premiums for SMEs (companies employing up to 200 people) have increased by 10% since 2010 according to employee benefits consultancy Mercer. SMEs are now paying average annual premiums per member of £1,532 up from £1,499. Mercer believes that this was partly caused by insurers looking to boost margins that were eroded in the recession, when premiums were dropped in order to retain business, but also by rising healthcare costs, driven by expensive new forms of treatment and an ageing population. Employees aged over 65 constituted 3% of all workers in 2010, a percentage that has doubled over the last decade.

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SME VIEW: A MANAGEMENT TOOL OR A HEADACHE?

While insurers often promote PMI as a tool for improving productivity and preventing absence, surveys suggest that it remains regarded as a “perk” by employers. According to Mercer’s 2010 employer survey, attraction and retention of talent is the most important objective behind offering health-related benefits. While 42% of employers use PMI as a means of managing long-term absence (Chartered Institute of Personnel and Development), just 11% cite it as a top three most effective method for tackling this problem, behind 14 other services and tools including occupational health involvement, restricting sick pay and flexible working. Aon Hewitt’s Benefits & Trends Survey 2011 found that nearly a third of employers are planning to revise their healthcare benefits, driven by the need to reduce expenditure.

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