Protect and survive survey: Comparing notes on going private

Choosing private medical insurance will soon be a lot simpler. So what should you look for?

From July, it will be much easier to compare private medical insurance (PMI) policies. After a highly critical report from the Monopolies Commission, insurers specialising in this area have agreed to include in their sales bumph a standardised list of the cover included in their policies.

In the past, making comparisons between different policies was sometimes very difficult. No two insurers seemed to offer the same cover - and there are some two dozen providers offering several hundred different types of schemes.

Some include all out-patient costs, others only include it if it follows a course of in-patient treatment. Some limit outpatient treatment to pounds 500 a year, others to pounds 1,000. In fact, most have different limits on what they will pay for different types of treatment. Many exclude alternative medicine, while a few include osteopathy or chiropractic treatment.

And when it comes comparing cheaper, budget policies, you can end up with a real headache. For example, some will only pay if treatment is not immediately available on the NHS ("immediately" often meaning within six weeks). Others severely restrict your choice of hospital for private treatment, which can mean difficult transport problems.

When it comes to emergency treatment, almost all of us rely on the NHS. It is only usually in the case of non-critical problems, such as arthritis, where there are often long waiting lists that PMI comes into its own.

As it is, sales of medical insurance have been fairly static. The Government's removal of tax relief on premiums for the over-60s after the 1997 general election slowed down what growth there was. The Association of British Insurers, the trade body for the industry, estimates that today just over six million people have PMI policies and that it costs us almost pounds 2bn a year in premiums.

Most of these are job perks, where the employer offers membership of a PMI scheme at substantially lower costs than if you were to buy the policy privately - but you will have to pay income tax on the perk.

Bupa, the largest PMI insurer with some 40 per cent of the market, states that nearly two-thirds of those covered by its medical insurance are in company schemes.

Private buyers largely tend to be the self-employed, or members of small companies or partnerships who cannot afford to spend time being on a hospital waiting list. They want the right to have private medical treatment at a time and place of their own choosing.

"Many people should have PMI, but the problem is that the costs can be prohibitive, especially for older people," says Carol Anne Hewett of Wilton Spero & Partners, a firm of independent financial advisers.

"For example, PPP, the second-largest PMI firm, has just increased the premium for a 40-year-old female client of mine who is on its basic scale from pounds 490 to pounds 628 a year, probably because she has slipped into a different age-band."

And costs are a problem. The i.e.group of independent financial advisers has just launched i.e.health to help clients through the PHI maze. "Bupa and PPP have been in the market a long time, taking the lion's share, but we say that there is a much wider choice," says Tony Knight, a director of the company.

"After making sure that we select the right sort of policy that covers exactly what the client wants, we reckon that we can offer alternatives to the market leaders that will save around 30 per cent on their premiums."

"PMI premiums are constantly rising," he adds. "Last year, we reckon that they went up on average between 9 and 10 per cent, much more than inflation." The rises are because we are claiming much more than we used to: choosing to go for private treatment for complaints that in the past would have been dealt with by our GPs; and choosing to have more serious conditions, such as cancer, treated privately rather than on the NHS.

Then there's the increasing use of expensive technology which has led to higher private-hospital costs.

"For example, if a client had a knee problem in the past, they would have a relatively cheap arthroscopy examination," says Michael Davies of CS Healthcare, one of couple of friendly societies that offers PHI.

"Now the consultant will use a much more expensive MRI scan, which is less invasive and gives better information. Hospitals have invested heavily in expensive technology and doctors, rightly, want to use it."

You can cut down on costs if you are planning to buy PMI. Consult an independent financial advisor who can tell you what sort of cover is available for different. Look at budget plans, as long as you are happy with the restrictions. If you are prepared to pay the first pounds 100 or so as an excess on the policy, you can often save 10 per cent or more on the annual costs, and even more if you accept higher excesses.

And be prepared to search around. CS Healthcare, for example, is open to all civil servants and local authority employees, their families and anyone who has ever worked in the public sector, including the privatised utilities.

It charges a 27-year-old man pounds 27.35 a month, a married man aged 40 with a wife and two children pounds 67.97 a month, and a 60-year-old couple pounds 82.66 a month for its standard PMI policy.

For the over-50s, the Exeter Friendly Society is also worth contacting. It would, for example, charge a 60-year-old around pounds 71 a month for its policy. These rates compare very favourably against others in the market.

"There are cash schemes around that provide an alternative to the market leaders, paying out fixed amounts for different types of treatment, including dentistry - something more conventional PMI policies usually exclude. But they are limited in their appeal," says Carol Anne Hewett.

This is because such schemes won't cover anything like the cost of private hospital treatment, and are more useful as a cash payment to anyone who has to go NHS.

Wilton Spero & Partners - 01628 822121; i.e.group - 0800 975 9100; CS Healthcare - 0800 917 4325; Exeter Friendly Society - 01392 477200