OFT gives health insurers 'final warning' over policies

THE OFFICE of Fair Trading has issued a "final warning" to health insurers, ordering them to eliminate policies harmful to consumers or face full statutory regulation.

In its second attempt to reform private medical insurance in two years, the OFT yesterday gave health insurers until 30 September to transform their practice or face direct regulation by the Financial Services Authority.

John Bridgeman, the director-general, said the industry had broadly failed to respond to a damning OFT report in 1996. The report highlighted rampant inflation in premiums and widespread confusion among customers, who were often unaware that the policies failed to cover a whole swathe of medical needs. Mr Bridgeman said: "Health insurers have not shown much concern for improving the information, choice and service to their consumers. If the industry wishes to retain self-regulation it should carefully consider, and then act decisively upon, the recommendations in my new report."

The OFT said sales literature had confused customers to such an extent that 79 per cent of customers wrongly thought they were covered for chronic, ongoing medical conditions such as arthritis or Alzheimer's disease. They also thought their policy would pay for drugs needed after an operation.

In fact, private medical insurance only covers acute conditions that require one-off operations. Many policies exclude claims for outpatient treatment and few pay for drugs needed after an operation. The OFT wants health insurers to develop a code of practice which provides for a core of "benchmarked" products with simple, standardised terms.

Insurers must also show customers how quickly premiums can increase, the OFT said. Premiums in the past decade have risen by an average of 3.5 per cent a year above inflation. Many customers failed to realise that premiums also increased with age.

The regulator also said the Financial Services Authority should monitor the use of moratoria by health insurance companies. Under moratoria, customers can buy a policy without the need for a medical examination, but cannot claim if they are treated for a condition they already have within two years. This makes premiums cheaper and a quicker sale can be made.

The snag is that consumers with pre-existing conditions can be put off seeking treatment. The OFT said some patients recovering from serious illness had been sold moratorium policies even though they had been advised to go for regular medical check-ups.

It said other kinds of health insurance should also be standardised. These included critical illness insurance, permanent health insurance and long-term care insurance.

The pounds 2bn-a-year health insurance market is dominated by two players - Bupa, with 40 per cent of the market, and PPP, now owned by Guardian Royal, with 30 per cent. Norwich Union has 10 per cent. Bupa said it supported the OFT's call for benchmarked products and opposed the use of moratoria. But is resisted calls for customers to be shown how quickly premiums had risen.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Angel Di Maria is shown the red card
tech
Sport
Roger Federer after his win over Tomas Berdych
sport
Life and Style
News in briefs: big pants in 'Bridget Jones's Diary'
fashionBig knickers are back
Sport
James Milner is set to sign for Liverpool this week despite rival interest from Arsenal
sportReds baulk at Benteke £32.5m release clause
News
The controversial Motor Neurone Disease Association poster, featuring sufferer Michael Smith, has drawn a series of angry complaints
newsThis one has been criticised for its 'threatening tone'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral