The rise, the first since1990, took the number of people with private cover to 7.3 million at the end of 1998, one in eight of the population and a rise of 4.2 per cent over the year. Laing and Buisson, the private health consultancy which published the figures, said it was the "first significant increase" since the market levelled off in 1990.
The failure of the private health market to win new subscribers during the 1990s was seen as a tacit vote of confidence in the NHS as well as a reaction to the escalating cost of premiums. But if the rise develops into a trend, it could put pressure on the NHS to modernise.
Health economists have warned that if there was significant growth in the current 12.4 per cent of the population with private health cover, it could trigger a mass exodus of the well-off middle classes, leaving the NHS as a rump service for the poor and opening a gap between standards in the state and private sectors.
That could increase pressure on the Government to find new sources of funds for the NHS to enable it to compete with the private sector, reopening issues such as charging patients or imposing extra taxes.
A report from the Office of Health Economics last week said that Britain had the cheapest health system in the Western world, spending 6.7 per cent of gross domestic product compared with 10.4 per cent in Germany and 9.9 per cent in France.
Last year's growth in private insurance was solely in company subscriptions while individual subscriptions fell slightly, by 0.6 per cent.
Philip Blackburn, author of the report, said big premium increases had deterred individual subscribers and it was possible that the limit had been reached.
High price increases were driven by a sharp rise in the cost of claims, up 8.6 per cent to an average of pounds 1,695. This was due mainly to individuals making extra claims because of improvements in medical technology, which means more can be done, and a tendency for those insured to make use of it by getting problems seen to sooner rather than later.
Because of a rise in claims, companies incurred losses on private health insurance estimated at pounds 50m overall. Most insurers increased premiums by over 10 per cent in 1999.Reuse content