Rise in people cancelling private medical insurance policies: "The numbers no longer stack up"

FINANCIAL advisers are seeing a rise in clients cancelling private medical insurance (PMI), they have claimed.

During the Covid pandemic, the number of people purchasing PMI in the UK doubled.

According to the price comparison website ActiveQuote.com, sales of PMI, on average, increased by 100% between November 2020 and January 2021. This is when compared to sales between March and May of 2020. 

But now, financial advisers have shared that clients are cancelling their PMI.

They believe it is due to people and businesses tightening their belts as the UK economy struggles.

David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth Ltd, said many businesses and households are axing their policies.

He added: "There has been a notable uptick in PMI policy cancellations this year following the fiscal assault on the business community. Tax hikes, spiralling costs, stubborn inflation and economic uncertainty are seeing more and more businesses and households axe their PMI policies. 

"Companies are being forced to penny-pinch and re-evaluate their outgoings. Because it's not cheap, PMI is now back on the nice-to-have rather than must-have list and is the first thing many firms and households look at. Sadly these policies can be life-saving and policyholders should know that, rather than cancel outright, they can reduce the cost by adding an excess or limiting the cover. 

“Pre-Covid, PMI was seen by many as a luxury item as the NHS, at that point, was fairly reliable. The surge in uptake in PMI policies from Covid onwards was fuelled by the immense strain on the NHS of the pandemic. But a weak economy and tax squeeze are now seeing many firms cancel this very important cover.”

Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, agreed that the economy is to blame.

He said: "PMI cancellations are definitely picking up steam this year, and frankly, who can blame people and businesses when they're being hammered from all sides? Due to National Insurance hikes, high inflation and general economic uncertainty, companies are scrutinising every line item, and PMI often gets the chop first. 

"The irony is painful, though. Just when NHS waiting lists are at their worst and we need private cover most, businesses are forced to bin it because the coffers are empty. What was once considered essential during Covid has shifted back to ‘luxury’ status. 

“Before you cancel outright, consider tweaking your policy instead, such as raising the excess or reducing the cover. This can slash costs while at least keeping some protection in place.”

Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said PMI had moved from a necessity to a luxury.

He continued: "The popularity of PMI does seem to have dwindled recently, with companies having to rethink their benefit packages given increased NI and other employment costs. Consumers are also having to tighten their belts again with inflation remaining stubbornly high and interest rates also elevated. 

“Medical insurance has gone from a near-necessity to a 'nice to have', as we all prioritise the spiralling costs of business and home life. With the Autumn Budget looming, more businesses and households could be forced to cut this critical cover.”

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said PMI gets more expensive as people age.

He added: “PMI is one of those policies people often reassess when finances tighten. Unlike life insurance which typically has a fixed term or lifelong cover, PMI is annual and recalculated each year. As we age, the likelihood of claiming increases, and so do the premiums. 

"It’s therefore not surprising to see more clients reconsidering or cancelling, particularly as costs have risen sharply post-Covid. Many of my wealthier clients prefer not to maintain PMI, instead choosing to self-fund private treatment if needed. This gives them full control as they can pick any consultant, hospital or treatment pathway without being restricted by policy exclusions or referral systems. 

"However, it’s important to remember that PMI doesn’t cover emergency care such as A&E, so those without it still rely on the NHS for urgent needs. Ultimately, PMI can be valuable for peace of mind, but for some, escalating premiums and tighter household budgets mean the numbers no longer stack up.”

Scott Gallacher, Director at Leicester-based Rowley Turton, cautioned people against making rash decisions. 

He added: "PMI can certainly appear relatively expensive, and with increased pressures on businesses – such as higher National Insurance contributions – I’m not surprised to hear of some companies looking to cut costs by cancelling their private medical insurance. However, I’d urge caution. 

"The potential benefits of PMI are significant, especially with the NHS still struggling and likely to come under even greater financial pressure given the state of the government’s finances. On a personal note, I was once able to access prompt treatment through PMI that wasn’t available under the NHS – treatment that might well have made the difference between losing my hearing and not.

“And clients have shared similar experiences: one told me their loved one received specialist cancer treatment via their employer’s PMI, adding years to their life and giving their young children the chance to truly know and remember them. If cost is still an issue, speak to a specialist broker about your options.”