Why do private medical insurance premiums rise every year?

If you have private medical insurance, you may have noticed your premium rising each year, often by more than general inflation. This is one of the most common frustrations with PMI. This guide explains why private medical insurance premiums rise every year, and what you can do about it.

Two forces push premiums up

There are two main reasons your PMI premium rises: you get older, and the cost of medical treatment goes up. Each year you age, you become statistically more likely to claim, so your premium increases. On top of that, the underlying cost of providing private healthcare rises, a trend known as medical inflation. Together these mean premiums tend to climb year after year, often noticeably faster than the prices of everyday goods.

Getting older

Age is a major factor in PMI pricing, because the likelihood and cost of needing treatment rise as you get older. Many policies are age-banded, so as you move into a higher age band your premium steps up. This is a normal feature of how the product is priced, but it does mean that, all else being equal, your premium will rise as you age, sometimes sharply in later life.

Medical inflation

Medical inflation is the rising cost of healthcare itself, and it typically runs higher than general inflation. New drugs, advanced equipment and improved but more expensive treatments all push up what insurers pay. As medical science advances, more conditions can be treated and more sophisticated care is available, which is good for patients but increases costs. Insurers pass these rising costs on through premiums, which is a key driver of annual increases.

More and costlier claims

The overall volume and cost of claims also drives premiums. Private health insurers paid out record sums in recent years, with claims totalling billions of pounds and rising significantly year on year. When insurers across the market pay out more, premiums rise to match, even for people who do not claim, because the pool of claims everyone shares has become more expensive. This is the same principle that drives prices in other types of insurance.

NHS pressure

Pressure on the NHS plays a part too. With long NHS waiting lists, more people turn to private treatment, and more existing policyholders claim privately rather than wait. Higher demand for private healthcare, and more claims, feed into the cost insurers must cover. In this way, the strain on the NHS indirectly contributes to rising private medical insurance premiums, as the two systems are connected through the choices people make.

New treatments and technology

Advances in treatment are a double-edged sword for premiums. They allow better outcomes and treat more conditions, but they are often expensive, particularly cutting-edge drugs and procedures. As these become available privately, insurers face higher potential costs, which feed into pricing. So part of what you pay for is access to an expanding and improving range of treatments, the cost of which grows over time.

What you can do about it

You are not powerless against rising premiums. You can increase your excess, which lowers the premium in exchange for paying more towards a claim. You can reduce your level of cover, for example trimming outpatient cover or accepting a restricted hospital list, as our guide to levels of cover explains. You can also shop around, though switching needs care because of how pre-existing conditions are handled.

The risk of switching

Shopping around can save money, but switching PMI is not as simple as switching car insurance, because a new insurer may treat conditions that arose under your old policy as pre-existing. Some insurers offer to match your existing underwriting terms when you switch, known as continued personal medical exclusions, which preserves cover for conditions already covered. Always check how a new policy would treat your history before switching, or you could lose cover you rely on.

Reviewing your cover

Because premiums rise, it is worth reviewing your PMI at each renewal rather than simply accepting the increase. Consider whether the level of cover still suits you, whether a higher excess would help, and whether the policy still represents good value, a point the regulator has encouraged customers to think about. Reviewing actively, rather than letting the premium climb unchecked, is the best way to keep your cover affordable and appropriate.

No-claims discounts on some policies

Some private medical insurance policies operate a no-claims discount, similar to car insurance, where your premium reflects whether you have claimed. If you make a claim, you may move down the discount scale and see a larger increase at renewal. This is worth understanding, because it means a small claim can have a knock-on effect on your premium. For minor treatment, it can occasionally be worth weighing the claim against the longer-term cost, much as with other insurance.

Why your increase can outpace inflation

Because age and medical inflation both push premiums up, and they compound, your annual increase can be noticeably higher than general inflation. Moving into a new age band in the same year that medical costs rise can produce a sizeable jump. This is normal for the product, but it can come as a shock, which is why it helps to expect increases and to review your cover each year rather than being caught out by them.

Talking to your insurer

If a renewal increase concerns you, it is worth contacting your insurer to discuss the options before simply paying or cancelling. You may be able to adjust the excess, trim the cover, or change the hospital list to bring the premium down while keeping the cover you most value. Insurers would generally rather adjust a policy than lose a customer, so a conversation at renewal can often find a more affordable arrangement that still suits your needs.

The most important habit is simply not to be passive about the annual increase. Treating each renewal as a prompt to review your excess, your cover level and the wider market, rather than paying whatever is asked, is what keeps the cost under control over the long term. Premiums will rise, but how much you actually pay is shaped by the choices you make at each renewal, and even a modest adjustment can offset much of a year's increase.

In short

Private medical insurance premiums rise each year mainly because you get older and because medical inflation pushes up the cost of treatment, with record claims, NHS pressure and expensive new treatments adding to it. You can manage the increases by raising your excess, reducing your cover level, or shopping around, though switching needs care over pre-existing conditions. Reviewing your cover at each renewal helps keep it affordable and worthwhile.

Where to get help and next steps

Adjust your cover using our guide to levels of cover, weigh up the value in is private health insurance worth it, and read private medical insurance explained. This is general information, not financial advice.