TL;DR
As FCA-authorised private medical insurance experts in the UK who have helped arrange over 900,000 policies of various types, WeCovr understands the concerns our clients have about rising premiums. This analysis breaks down exactly why your health cover costs are increasing and what you can do about it. Analysis of age-banded pricing, claims history, policy renewals, and market inflation effects If you've noticed your private medical insurance (PMI) premium has increased at renewal, you're not alone.
Key takeaways
- Age-Banded Pricing: How your age is the single biggest factor.
- Claims History: The impact of using your policy.
- Medical Inflation: The hidden force making healthcare more expensive.
- Wider Market Effects: How NHS pressures and insurer strategy play a role.
- The risk of developing serious conditions like cancer, heart disease, or joint problems rises with age.
As FCA-authorised private medical insurance experts in the UK who have helped arrange over 900,000 policies of various types, WeCovr understands the concerns our clients have about rising premiums. This analysis breaks down exactly why your health cover costs are increasing and what you can do about it.
Analysis of age-banded pricing, claims history, policy renewals, and market inflation effects
If you've noticed your private medical insurance (PMI) premium has increased at renewal, you're not alone. It's a common experience for policyholders across the UK. While it can be frustrating, the price adjustments aren't arbitrary. They are driven by a combination of personal factors and powerful market forces.
Understanding these drivers is the first step to taking control of your health insurance costs. In this comprehensive guide, we'll demystify the four key pillars of PMI premium inflation:
- Age-Banded Pricing: How your age is the single biggest factor.
- Claims History: The impact of using your policy.
- Medical Inflation: The hidden force making healthcare more expensive.
- Wider Market Effects: How NHS pressures and insurer strategy play a role.
Let's dive into each element, so you can make informed decisions about your private health cover.
Factor 1: The Unavoidable Rise – How Age-Banding Impacts Your Premium
This is the most significant and predictable reason for premium increases each year. Insurers use a system called "age-banding," where premiums are set for each year of age. As you move from one age band to the next on your birthday, your premium automatically increases, even if you haven't made a claim.
Why does age matter so much?
From an insurer's perspective, it's a matter of risk. Statistical data overwhelmingly shows that as we get older, the likelihood of needing medical treatment increases.
- The risk of developing serious conditions like cancer, heart disease, or joint problems rises with age.
- Older individuals tend to require more frequent and more complex treatments.
- Recovery times can be longer, potentially leading to longer hospital stays.
Therefore, an insurer prices a policy for a 55-year-old higher than for a 35-year-old because the statistical risk is greater. This age-related increase happens every year, separate from any other factor.
Example of Age-Banded Premium Increases
To illustrate, let's look at how premiums might change for a non-smoker with a mid-level policy. These figures are illustrative examples to show the trend.
| Age Bracket | Example Monthly Premium (Mid-Range Cover) | Typical Year-on-Year Increase |
|---|---|---|
| 30-35 | £45 | 3-5% |
| 40-45 | £65 | 5-7% |
| 50-55 | £90 | 6-8% |
| 60-65 | £150 | 8-10% |
| 70-75 | £250+ | 10-15% |
As you can see, the percentage increase gets steeper in later life, reflecting the sharply rising risk profile. This annual age-related jump typically accounts for a significant portion of your renewal price change.
Factor 2: Your Claims History and the Role of No Claims Discounts (NCD)
The second personal factor influencing your premium is your claims history. Most UK PMI providers operate a No Claims Discount (NCD) system, similar to car insurance.
How does a No Claims Discount work?
The principle is simple: you are rewarded for not making a claim.
- You start on a specific level of the NCD scale, often around 20-40%.
- For every year you don't claim, you move up a level, and your discount increases, up to a maximum level (often 60-75%).
- If you do make a claim, you will typically move down the scale at your next renewal, usually by two or three levels. This reduces your discount and therefore increases your base premium.
The Double Impact at Renewal
If you've made a claim in the preceding year, you can face a "double whammy" at renewal:
- The age-related increase: Your premium goes up because you are a year older.
- The NCD reduction: Your discount is reduced, pushing the premium up further.
This is often why policyholders see a substantial jump in price after their first claim. It's not a penalty, but rather the removal of a discount they were previously receiving.
Example of NCD Impact
Let's trace a policyholder's journey:
| Year | Claim Status | NCD Level | Impact on Premium at Renewal |
|---|---|---|---|
| 1 | No Claim | 40% | N/A (New Policy) |
| 2 | No Claim | 50% | Moves up. Helps offset the age-related increase. |
| 3 | Claim Made | 50% | N/A |
| 4 | Renewal after claim | 20% | Moves down 3 levels. Discount is significantly lower. |
In Year 4, the policyholder's premium would rise due to both their age increase and the NCD dropping from 50% to 20%.
Understanding your insurer's specific NCD scale is vital. Some offer a "protected NCD" for an additional fee, which allows you to make a certain number of claims without your discount being affected.
A Crucial Point: PMI Covers Acute Conditions, Not Chronic or Pre-existing Ones
Before we go further, it's essential to clarify what private medical insurance is for. This is the single most misunderstood aspect of PMI in the UK.
PMI is designed to cover acute conditions that arise after you take out the policy.
- Acute Condition: A disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery. Examples include joint replacements, cataract surgery, hernia repair, or treatment for a curable cancer.
- Chronic Condition: A disease, illness, or injury that has one or more of the following characteristics: it needs ongoing or long-term monitoring, requires palliative care, has no known cure, or is likely to come back. Examples include diabetes, asthma, high blood pressure, and arthritis.
- Pre-existing Condition: Any illness or injury for which you have experienced symptoms, received medication, or sought advice before your policy start date.
Standard UK PMI policies do not cover the management of chronic conditions or treatment for pre-existing conditions. If you have diabetes, your PMI won't cover your insulin or regular check-ups. However, if you have a policy and later develop an acute condition (like needing a gallbladder removed), the PMI is designed to cover that. This principle is fundamental to how the insurance model works and keeps it affordable.
Factor 3: Medical Inflation – The Powerful, Invisible Force
This is arguably the most complex but crucial driver of PMI premium rises. Medical inflation is the rate at which the cost of providing private healthcare services increases. It consistently runs significantly higher than general inflation (the Consumer Price Index, or CPI).
While the ONS reported general CPI inflation at around 2.0% in mid-2024, medical inflation in the UK is estimated by industry experts to be between 8% and 12% for 2024-2025.
So, even if you don't age and don't claim, your premium will still rise by this underlying rate to keep pace with the soaring cost of treatment.
What Makes Up Medical Inflation?
Several components contribute to this high rate:
- Advanced Medical Technology: New diagnostic scanners (MRI, CT), surgical robots (like the da Vinci system), and minimally invasive techniques are incredibly effective but also extremely expensive to buy, maintain, and staff. A new MRI scanner can cost over £1 million.
- Expensive New Drugs: Breakthrough pharmaceuticals, particularly in oncology (cancer treatment) and for autoimmune diseases, can cost tens or even hundreds of thousands of pounds per patient per year. As these become approved for use, they are added to the list of treatments insurers cover, pushing up the potential cost of a claim.
- Higher Staffing Costs: There is a global shortage of highly skilled clinicians, nurses, and specialists. Private hospitals must offer competitive salaries and benefits to attract and retain top talent, especially in a market where the NHS is a major employer.
- Increased Patient Demand & Complexity: With an ageing population, the complexity of cases is increasing. A patient may present with multiple issues (comorbidities) that make their treatment and recovery more complicated and costly.
Think of it this way: your PMI premium isn't just a number. It's a reflection of the cost of a potential hip replacement (£13,000+), a course of chemotherapy (£30,000+), or complex heart surgery (£25,000+). As the price tags for these procedures rise, so must the premiums that fund them.
Factor 4: The Wider UK Health Market and NHS Pressures
You cannot analyse the private healthcare market without looking at the state of the National Health Service (NHS). The two are intrinsically linked.
The Impact of NHS Waiting Lists
Record-high NHS waiting lists are a primary driver of demand for private medical insurance UK. As of mid-2024, the NHS England waiting list for consultant-led elective treatment stood at over 7.5 million cases. Many people are waiting over 18 weeks, and in some specialities like orthopaedics, waits can be over a year.
This has two major effects on the PMI market:
- Increased Demand for PMI: More individuals and companies are turning to private health cover as a way to bypass long waits and get treated sooner. This influx of new policyholders, many of whom may have existing health concerns, increases the overall risk pool for insurers.
- Increased Claims Volume: Existing policyholders who might have previously used the NHS for a procedure are now more likely to use their private insurance. This surge in claims puts upward pressure on insurers' costs, which is then passed on to all policyholders through higher premiums at renewal.
Insurers must price their policies based on the anticipated volume and cost of claims. As more people use their insurance due to NHS delays, the collective cost for the insurer rises, and this is reflected in everyone's renewal price.
Insurer Profitability and IPT
Like any business, insurers need to remain profitable to be sustainable. They set premiums to cover the expected cost of claims, run their business, and achieve a target profit margin. If claims costs rise faster than expected, they will adjust premiums upwards across the board to maintain their financial stability.
Finally, there is Insurance Premium Tax (IPT). This is a tax levied by the government on all general insurance premiums, including PMI. The standard rate is currently 12%. Any increase in your base premium automatically means you pay more tax, further adding to the final cost.
How to Manage Your Rising PMI Premiums
Seeing your premium increase can be disheartening, but you are not powerless. There are several practical steps you can take to manage your costs without sacrificing peace of mind.
1. Review Your Level of Cover
Does your policy have features you don't need? Often, comprehensive plans include therapies cover (physiotherapy, osteopathy), mental health support, or extensive outpatient options. Scaling back on some of these could result in significant savings.
2. Increase Your Excess
The excess is the amount you agree to pay towards the cost of a claim. Increasing your excess from £100 to £500, for example, can reduce your premium by as much as 15-25%. You're taking on a little more of the initial risk, and the insurer rewards you with a lower price.
3. Adjust Your Hospital List
Most insurers offer different tiers of hospital lists. A national list including the top-tier London hospitals is the most expensive. If you don't live near London or are happy to be treated at excellent local private hospitals, switching to a more restricted list can lower your premium.
4. Consider a Six-Week Wait Option
Some policies offer a "six-week wait" option. This means if the NHS can treat you for an eligible condition within six weeks of the recommended treatment date, you will use the NHS. If the wait is longer than six weeks, your private cover kicks in. This can be a very cost-effective way to get the best of both worlds, offering substantial premium discounts.
5. Maintain a Healthy Lifestyle
This is a long-term strategy but an effective one. Many insurers now offer rewards and discounts for healthy living, such as tracking your steps, having regular health check-ups, or engaging with wellness apps.
- Nutrition: A balanced diet rich in fruits, vegetables, and whole grains can help prevent chronic diseases. As a WeCovr client, you get complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app to help you stay on track.
- Activity: Aim for at least 150 minutes of moderate-intensity activity per week, like brisk walking or cycling.
- Sleep: Prioritise 7-9 hours of quality sleep per night. Poor sleep is linked to a range of health issues.
6. Speak to an Independent PMI Broker
This is the most effective step you can take. At renewal, your current insurer will only offer you their own products. An independent broker, like WeCovr, can conduct a full market review on your behalf.
- We Compare the Market: We work with all the major UK providers (like Bupa, AXA Health, Aviva, Vitality) and can find a policy that offers equivalent or better cover for a more competitive price.
- Expert Advice at No Cost: Our service is free to you. We are paid a commission by the insurer you choose, so you get expert, unbiased advice without any extra fees. We have high customer satisfaction ratings for a reason - our focus is on finding the right cover for you.
- Seamless Switching: We handle all the paperwork to ensure you can switch providers on a "continuation of personal medical exclusions" basis, meaning you don't lose cover for conditions that were already covered by your old policy.
- Added Value: When you arrange your PMI or Life Insurance through WeCovr, we also offer discounts on other types of insurance you may need, providing even more value.
Don't simply accept your renewal quote. A 15-minute call with an expert broker could save you hundreds of pounds a year.
Will my premium always go up every year?
Is it worth claiming for small amounts on my PMI policy?
Why doesn't my UK private health insurance cover my pre-existing high blood pressure?
Take Control of Your Health Insurance Costs Today
Understanding why your PMI premium is rising is the key to managing it effectively. While factors like age and medical inflation are outside your control, your choice of policy and provider are not.
Don't let premium increases push you away from the valuable security that private health cover provides. Let the experts at WeCovr help.
