More patients set to go private

The number of people taking out private medical insurance (PMI) is set to rise for the first time in a decade this year, with research predicting that a new range of low-cost policies could help the market grow by up to 10 per cent by 2010.

Sales of individual PMI policies have been in decline in recent years, as both higher medical costs and higher levels of claims have pushed up the cost of cover across the market.

However, research from Datamonitor, the independent analyst, suggests that the launch of lower-cost policies has helped renew interest in the market.

Such policies typically feature much higher excesses than conventional insurance, or only cover certain conditions. In return, premiums are much more affordable.

James Dieppe, an analyst at Datamonitor, said that while the market for corporate PMI - where employers buy cover on behalf of their staff - remained relatively healthy, insurers had to find new ways to sell individual policies.

Dieppe said: "Insurance companies have realised that, with premium costs spiralling, consumers are not going to take out private medical insurance unless providers offer them good value for money."

Datamonitor said that PruHealth - a new policy from Prudential which lowers premiums for customers who go to the gym and take health checks - had also played a major role in the industry turnaround.

However, PMI advisers are divided on the merits of the new-style policies.