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Aviva’s profits are rising as demand for UK private health insurance explodes

Growing demand in Britain for private health insurance as NHS waiting lists remain at near-record levels has boosted full-year profits at Aviva, with more frequent claims and higher medical costs pushing up premiums.

Britain’s largest general insurer said sales of health insurance rose 41% in 2023 compared to the previous year, with strong demand from businesses and individual customers, who took out policies as the crisis in the state health service continued.

The expansion of Aviva’s health insurance business helped boost annual operating profit by 9% to £1.5 billion last year, better than analysts forecast.

Aviva’s CEO, Amanda Blanc, said: “We have seen individuals look at the NHS and say, ‘I can afford to buy health insurance, so I will.’ So we have certainly seen an application in individual policy. We have also seen small businesses take advantage of the opportunity to protect their employees.”

More small employers are offering health cover to their staff and some large companies are expanding their cover, with additional features such as a digital GP service, she said, which gives customers access to an NHS-qualified GP via video consultation and text. Around 1.2 million people are covered by Aviva’s healthcare policy, making it the third largest player in the UK market after Bupa and Axa.

Charlotte Jones, Aviva’s chief financial officer, added that more people were signing up for health insurance through their company than before. “Where it’s always been there, but they haven’t prioritized it – through salary sacrifices or something like that – there’s more pressure, and more people are prioritizing it.”

Amanda Blanc, CEO of Aviva, was paid £6.6 million last year. Photo: Lance McMillan/Toronto Star/Getty Images

Blanc said premiums have risen in part due to higher medical costs, which are rising 8% to 10%, although Aviva has been able to limit price increases through long-term contracts with hospitals. Customers were also making claims more often, she said – both for low-cost items such as physiotherapy, which they would traditionally receive through the NHS, and for more expensive procedures such as surgery.

Hospital admissions paid for through private health insurance remained at near-record levels between January and September 2023, up 7% from a year earlier, according to data released by the Private Healthcare Information Network this week.

“That doesn’t surprise me at all,” Blanc said. “There are some schemes where you have a waiting period, but if you can’t get an NHS appointment within six weeks your private health insurance will come into effect.”

NHS waiting lists for routine operations in England reached record highs last year fell back in January. The waiting list is expected to “begin to decline consistently but slowly from mid-2024,” the Institute for Fiscal Studies predicted – although it will remain larger than before the Covid pandemic until 2030.

Aviva also sells pensions, life insurance and car, home and travel insurance, and has 16 million customers in Britain, out of 19 million worldwide. Blanc received £6.6m last year, up 22% from 2022, boosted by a higher long-term share bonus, the company’s annual report showed.

The Aviva share price rose more than 4% in early trading on Thursday before trading almost 2% higher at 463.8p. The company has been the subject of takeover speculation, with Italian insurer Generali reportedly eyeing it.

Blanc dismissed this as “random market chatter.” A number of British companies have recently attracted interest in takeovers, including Aviva’s rival Direct Line, which last week rejected a £3.1 billion bid from a Belgian insurer as “highly opportunistic”.

“If you look at most UK stocks today you would say they probably don’t have the valuation they should have,” Blanc said, pointing to Brexit, the pandemic, the mini-budget turmoil and other issues.

“Certainly, we would say there is plenty of room in our share price. But we are really focused on the things we can control, which is the brilliant performance of the company.”