Covid – a rare bonanza for Europe’s private medical insurers
Covid has seen high demand and low claims for European PMIs which suggests soaring demand for private health care over the next few years.
Dr George Veliotes, chairperson of Europco, the Association of European health care insurers, reckons that, on average, European PMIs saw premium income rise by 5-7% whilst claims ran at around 80%. He says that Covid saw demand hold up well. “Individuals and employers were keen to renew policies. People have clung on to their policies.” He also says that there is no question that there has been a substantial drop in claims.
In some countries regulators have pushed insurers to give customers substantial rebates. In the UK after some pressure from the Financial Conduct Authority, Bupa paid back £125m or roughly one month in 12 to reflect the drop in claims. Axa is also offering a rebate whilst Vitality is strangely quiet. But the picture remains mixed. The German Insurance Association says that private medical insurers saw a drop of 0.1% in individuals with private medical cover, although it is worth noting that this is a much lower drop than others in recent years.
Lower claims have had a big impact on balance sheets. Bupa’s 2020 results, for instance, reveal that: “Net cash generated from operating activities was £1,478m, up £616m on prior year (2019: £862m) reflecting the delay in claims outflows in the insurance businesses.” Before you get too indignant, it is worth bearing in mind that private medical insurance is not a money spinner and that the sector loses money in many countries – so this is a rare one-off.
In any case, much of the money will be spent over the next few years as policy holders catch up with their ailments. The point is that relatively little of this expenditure will have been lost. A big investor in dentistry and ophthalmology networks in Europe told us: “Whilst dental check ups missed in Covid are likely to be lost income, actual procedures for fillings etc will be merely postponed. It is the same with cataracts – unless the patient has died in the meantime the cataract operation will still be needed.”
And of course, a lot of people are now sitting on a lot of cash. Caixa Bank research fund that: “Volumes of bank deposits in the major European economies increased significantly in both March and April (2019). In Spain, for instance, the increase amounted to 20 billion euros in March-April (equivalent to 1.6% of GDP in 2019), while in France it was 45 billion (1.9% of GDP). In Germany, the increase reached 16 billion (0.5% of GDP).” Some of that is likely to be spent on elective procedures, particularly in cash-strapped NHS systems such as the UK, Spain and Italy. The next few years will be a boom time for the for-profit health care services sector.
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