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Market consolidation and contraction increases importance of impartial advice

The Competition & Markets Authority (CMA) approval of AXA PPP’s acquisition of Simplyhealth’s private medical insurance and self-insured health care trust business is the latest in a long line of consolidations stretching back more than a decade, and follows hot on the heels of the same Insurers acquisition of The Permanent Health Company weeks earlier.

These consolidations mean more than ten private medical insurance and health care trust providers have exited the market, including household names such as Guardian Health, Standard Life Healthcare and Medisure.So what is the impact for individuals and businesses buying private medical insurance? Five providers now control more than 93 percent of the market, offering broadly similar propositions. Therefore buyers might be tempted to select on price alone. John Dean, Managing Director of Punter Southall Health & Protection, a market leading health, protection and wellness advisory group says “Consolidation and commoditisation of the market could lead to buying decisions being made simply on premium cost alone.

There is a greater complexity to buying private medical insurance than merely comparing a table of benefits and making your decision based on cost. Although the market has contracted there are subtle but often significant differences between the approaches of the reduced number of providers, which should form part of the buying decision, to avoid potentially expensive mistakes. Directional care, limited access hospital plans, underwriting, and the interpretation of each provider’s terms and conditions are as significant to the buying decision as benefits, features and cost. We would encourage anyone buying private medical insurance, whether they are an individual or a corporate buyer, to seek independent and impartial advice from a market expert to avoid making potentially expensive mistakes.”

Dean also said the recent announcement that Insurance Premium Tax (IPT) is to increase from 6 percent to 9.5 percent from November 2015 should  see mid to large corporate buyers consider a Health Care Trust as an effective alternative  healthcare funding mechanism to traditional PMI. “There is an increased complexity to set up a health care trust, but the advantages are obvious. This will become a viable option to many clients who had previously discounted the option.  The key to success of any arrangement is “seek expert advice”.

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