Health conditions trap older people into soaring healthcare premiums

Despite the NHS's public problems, the number of people taking out personal healthcare insurance is falling. Increasing numbers of long-time users of PMI - permanent medical insurance - are so unhappy with massive premium increases they are now opting for self-insurance.

ABI figures show that while the number covered by PMI is rising each year, this reflects the greater number covered by employer schemes. Fewer people are taking out personal policies. The total number of people covered by company and personal PMI policies today is 6.5 million, the same as a decade ago. But insurers' premium income has almost doubled in that time.

The premium increases are causing distress to many long-time users of the sector. Angela Feather, in Wandsworth, south-west London, found her AXA PPP Healthcare premiums rose by 87 per cent in four years, to £2,670 a year. The high cost is despite receiving a 15 per cent occupational discount as a working nurse practitioner and after taking a reduction in the level of cover. But she is 66 and she is suffering from the often severe increase as a person approaches old age.

"I have been a member for over 30 years," Ms Feather says. "When I was younger I didn't claim. It is since PPP became part of AXA that premiums suddenly rose."

Shirley and Robin Canning, company directors who live in Newbury, West Berkshire, found their premiums on their AXA PPP Healthcare group policy shot up this year from £1,765 to £2,224, an increase of 26 per cent. "We didn't believe it when the bill arrived," Mrs Canning says. "But it was correct. I think insurers have got you in a net. Once you have a problem you have to pay [increased premiums], because you can't leave."

Mrs Canning says they cannot move insurers because her husband recently had a heart by-pass and his condition would be excluded from cover by any other insurer. Health premiums are not directly affected by an individual's claims, but by the claims record of the pool of insured of a similar age.

Several health sector experts point the finger at AXA for rising premiums at a rate even higher than the industry average. Bill Poynton, of the specialist brokers Health Care Plus, says the people in the worst position are PPP customers formerly covered by their HealthWatch policy, who have been transferred by AXA on to its Executive plan with higher premiums and lower levels of cover, especially for out-patient treatment. Mr Poynton says many of his clients are unhappy, particularly those with medical conditions who in most instances cannot move to another insurer without losing cover for that condition.

Henry Chuks, director of the online broker E-Insurance Directory, said he had been contacted by many people angry at premium hikes, especially from AXA PPP. "There are only three main players in the PMI industry: BUPA, AXA/PPP, and Royal & Sun Alliance," he says. "These larger companies may offer more to clients in service and benefits but this is obviously at the price of increased cost which many consumers are loath to pay. People should shop around."

Dr Penny O'Nions, principal of the health specialist IFA, the Onion Group, says she, too, has had many inquiries from clients unhappy at premium increases. One, who is 82, with a 71-year-old wife, is paying £15,000 a year for their health and travel insurance. "He is now making his first claim, for a hernia," Dr O'Nions says. "She has claimed once, for dental treatment, which was rejected. They feel they have to keep on their policy because they believe they will fall ill as soon as they lose cover." Others who are younger are giving up on health-care insurance, moving to self-pay for private care. "People are moving in their droves," Dr O'Nions says. Her firm has recorded a 30 per cent increase in the number of people who self-insure by putting into savings accounts what they used to pay in premiums, hoping it will be enough pay for private treatment.

A spokesman for AXA PPP said premiums had increased sharply as a result of high claims in "the book of business"- the pool - to which the insured belong. He said they had paid out £10,000 for Ms Feather and more than £17,000 for Mr and Mrs Canning since 2001, "which illustrates the value of their cover". Customers of the company's HealthWatch plan had been transferred to the Executive policy, he said, because "the HealthWatch portfolio ... was not cost-effective". The Executive policy provided less out-patient cover for diagnostics, but provided higher levels of cover for other treatments such as acupuncture.

Norwich Union says its premiums are rising only by 5 per cent a year on average. BUPA declined to provide a headline average but says medical inflation is three times retail price inflation and insurers should not raise premiums by more than 7.5 per cent.

The high technology involved in modern medicine means health care costs are rising fast. Several insurers offer limited, more affordable policies. Norwich Union has a Trust Care policy under which in-patients can use private beds in NHS hospitals. Premiums are 20 to 25 per cent less.

Consumers taking out PMI policies for the first time must shop around carefully. An error made as a young adult can turn out to be very expensive by old age.