PRIVATE HEALTH CARE A SPECIAL REPORT: PMI: Degrees of cover at a price

New providers continue to pile into private medical insurance (pmi) even though the market has remained static through the 1990s. Some 6.4 million people have pmi cover, according to healthcare consultants Laing & Buisson. Tim Baker, commercial director of Norwich Union healthcare, believes sales are closely linked to the consumer economy and lack of confidence about the future is hindering people from buying a long-term product despite mounting concerns about the National Health Service.

Variations on traditional insurances which has concentrated on hospital cover, are proliferating as new providers try and offer something different. One of the latest into the fray is Legal & General whose Lifetime HealthCare Plan provides hospital cover, cash contributions towards dental, optical, alternative treatment and maternity costs, and a lump sum for permanently disabling injuries or accidental death.

The cash benefit of pounds 200, pounds 400 or pounds 500 depending on whether the policyholder has single, couple or family membership can be enhanced through a no claim bonus and if the policyholder opts for free treatment on the National Health Service. The pmi part of the plan covers just non-emergency medical conditions, leaving the NHS to sort out the emergencies.

L&G's aim has been to keep down the costs of premiums and work in parallel with the NHS rather than in competition. Sun Alliance's Health First Direct, launched last year, similarly excludes emergencies and specific areas of healthcare that the NHS does well like cancer, heart attacks, strokes, kidney failure and transplants. It cuts the cost of comprehensive pmi by about 30-per cent.

The emphasis on cost continues, but insurers tackle the issue differently. Six week wait policies, which offer private treatment if local NHS waiting lists are more than six weeks, are still sold but not as actively. No claims bonuses and excesses, where the patient opts to pay the first pounds 100 or more towards treatment, are more to the fore.

Prime Health's Primecare policy, which it markets as comprehensive cover at a budget price, offers an increasing scale of no-claims discounts up to 30 per cent. BUPA keeps premiums down in its Local HospitalCare plan through restricting patient choice to a single local private hospital and through excluding the cost of outpatient consultations. Excesses of up to pounds 500 are also available. Norwich Union's Personal Care excludes outpatient treatment, but offers a range of hospitals and has no cash limits on treatments. The variation of cost and type of pmi policy available is huge. Some insurers target particular age groups. OHRA, the Dutch owned insurer, offers no claims bonuses, excesses and a loyalty bonus which works in favour of those joining young. Policyholders are guaranteed they will never have more than one age-related premium increase through the life of the policy. Although those joining in their 20s pay more initially with OHRA, they reap the rewards in their 60s.

Exeter Friendly Society aims its marketing at the elderly by promising no age related premium increases. It also targets those up to the age of 80, whereas many insurers have much younger cut off points.

At the other end of the scale those with no money worries, who do not want to be hemmed in by exclusions, can opt for a deluxe pmi policy available from Prime Health, Clinicare, Norwich Union and PPP. They are expensive but include extras like travel insurances routine dentistry, opticians' bills, critical illness, psychiatric treatment and maternity cover, which are not available on standard comprehensive policies. Pre-existing medical conditions, usually a no-go area, are also covered in PPP's Platinum plan and Clinicare's Carte Blanche and other plans, for additional loadings.

Les Curson, general manager of Clinicare, said his expectations that Carte Blanche would appeal most to the affluent elderly had proved wrong and it was selling well to couples in their 30s attracted by the maternity benefit. Jan Lawson, a partner of independent intermediary Private Health Partnership, says the main thing most people want to add to comprehensive medical insurance is dental cover. They do not necessarily want the full package of extras, but it is not possible to pick and choose.

Not all insurers intend to go the deluxe route. BCWA says its research shows people want comprehensive cover at reasonable prices. A couple aged 35-to-39 with two children buying BCWA's Preferential comprehensive cover would pay pounds 80.12 a month for treatment in a middle ranking (Band C) hospital. The same couple opting for a deluxe policy could pay between pounds 95.76 a month with Primecare Plus Gold to pounds 452.08 a month with PPP's Platinum plan.

The overcrowded nature of the pmi market has caused concern about hard selling. The Office of Fair Trading launched an enquiry last May to see whether contracts had unfair or obscure clauses or exclusions. The then Director General of Fair Trading Sir Bryan Carsberg said there was scope for mis-selling and asked if consumers were getting value for money and the right products for their needs. The results of the enquiry are expected in about two months time.