Why health insurance should be judged by its cover

Ten essential questions you should ask before taking out, or changing, your policy.

FOLLOWING RAPID expansion in the Seventies and Eighties, private medical insurance has hit the doldrums in the Nineties, largely because premiums have continually outstripped inflation. Despite that, and most people's passionate support for the NHS, medical insurance remains popular with many, especially those for whom a NHS waiting-list could threaten their livelihood as well as their health.

What cover have I got?

Many insurers have a range of different policies; some giving very comprehensive benefits while others exclude out-patient benefits in order to save money. Check that you have the cover you want and that it covers who you want it to. If your present insurer cannot offer the cover you want, shop around. Beware, though, that if you have suffered any medical conditions (even apparently minor ones) since starting your policy, any new insurer may exclude that condition from your cover, so you could be worse off.

Am I covered for pre-existing conditions?

You may be asked lots of medical questions and then have certain conditions excluded, or you may be subject to a moratorium. That is where you are not covered for pre-existing conditions for a minimum of two years and until you have been free of treatment, including regular check-ups, for two years. The Office of Fair Trading does not like moratorium underwriting, because it thinks people can be confused about what cover they have.

Insurers that offer it argue that it gives the opportunity to become covered once you have been treatment free for two years. Some insurers give a choice while, if you are covered under a company policy, there are likely to be no exclusions for pre-existing conditions.

What is your track record on premium inflation?

In a recent report, the Office of Fair Trading also asked insurers to tell their customers what their track record has been on price changes. The cost of insurance goes up as you get older, with most insurers having five-year age bands so, once every five years, your premiums are likely to increase significantly anyway.

Every year, though, your premiums are likely to go up, mainly due to the rate at which medical costs are rising. New techniques can mean better treatment, but often mean higher costs, too. Gissings, a firm specialising in this area, says that GP fundholding means that more patients are being referred to their insurers for treatment.

What are you doing to keep your costs low?

You may now have less cover or less choice or your insurer may have imposed tighter control over the fees your consultant can charge. That could mean having to pay any excess yourself, so you should always check with your insurer before undergoing any medical treatment.

Are there restrictions on hospitals I can be treated in?

There are around 600 independent hospitals and NHS private wings in the UK, ranging from small hospitals up to large hospitals with international reputations. To keep costs low, many insurers now have a preferred list of around 120 hospitals, which have agreed special prices. The downside is less choice, and your chosen consultant may not work at the hospitals on the list.

Is my local hospital included?

Most patients go to their local hospital for minor treatments, and to a specialist or teaching hospital for more complex conditions. Now, shorter hospital stays and more day-case treatment (you go home the same day after your operation) mean it can make sense to shop around to get the best treatment, even if that means travelling further.

Can I increase my benefits?

Most people tend to stick with the cover that they originally chose, but new products can mean better cover may be available. For example, some policies now include free travel insurance, so if you travel or holiday abroad you could save money even by choosing a more expensive policy. Check on any restrictions that may apply before making any move.

How can I reduce my premiums? There are three main ways to reduce costs:

Choose a policy with less cover. One way may be to exclude out-patient cover. While a single out-patient consultation is likely to cost less than pounds 150, a course of treatment, perhaps over many months, could easily negate any initial savings.

Pay an excess. By agreeing to pay the first pounds 50-250 of each claim, or each year's claims, you could save up to 25 per cent of your premium.

Read the small print. some insurers offer a no-claims bonus, and paying a one-off small claim yourself could mean paying a lower premium next year. Paying annually could save 5 per cent. If you have joint cover with your spouse, and they are some years older or younger than you are, it could be cheaper for you to each have individual cover.

What is your customer complaints' procedure?

Most insurers are members of the Insurance Ombudsman Scheme or use the Personal Insurance Arbitration Service. Ask your insurer how many complaints have been referred and how many it has lost - that could give an indication of how generous they might be.

How do I claim?

Ten years ago, claiming meant filling in a claims form and hoping the insurer would pay. Now, most run telephone helplines staffed by qualified nurses, and some offer medical information even if you are not claiming. If you do need treatment, the last thing you want to worry about is whether you are covered and how much you may have to pay yourself, so a telephone helpline can be a valuable benefit.

Andy Couchman is publishing editor of HealthCare Insurance Report