Aviva’s profits rise as demand for UK private health insurance booms

Booming demand in the UK for private health insurance, as NHS waiting lists remain at near-record levels, has boosted annual profits at Aviva, with more frequent claims and higher medical costs driving up premiums.

Britain’s biggest general insurer said sales of health insurance had risen 41% in 2023 compared with the previous year, with strong demand from businesses and individual customers, who were taking out policies as the crisis in the state health service continues.

The step up in Aviva’s health insurance business contributed to a 9% rise in annual operating profits to £1.5bn last year, better than analysts had forecast.

Aviva’s chief executive, Amanda Blanc, said: “We’ve seen individuals looking at the NHS and saying: ‘I can afford to buy health cover, so I will do that.’ So we’ve definitely seen a take-up in individual policies. We’ve 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 big companies are expanding their cover, with add-on provisions such as a digital GP service, she said, which offers customers access to an NHS-qualified primary care doctor through video consultation and text. About 1.2 million people are covered by Aviva health policies, making it the third biggest 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 cover through their company than before. “Where it’s always been there, but they haven’t prioritised it – through salary sacrifice or something like that – there’s more of a push, and more people are prioritising it.”

Amanda Blanc, Aviva’s chief executive, was paid £6.6m last year. Photograph: Lance McMillan/Toronto Star/Getty Images

Blanc said premiums had gone up partly due to higher medical costs, which are rising by 8% to 10%, although Aviva had been able to limit price rises through long-term contracts with hospitals. Customers were also making more frequent claims, she said – both for low-cost items such as physiotherapy, which they traditionally would have got through the NHS, and more expensive procedures such as surgery.

Hospital admissions paid for through private medical insurance remained at near record levels between January and September of 2023, up 7% on 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 time but if you can’t get an NHS appointment within six weeks, your private health cover kicks in.”

NHS waiting lists for routine operations in England hit record highs last year but fell back in January. The waiting list is expected to “start to fall consistently but slowly from the middle of 2024”, the Institute for Fiscal Studies has predicted – though it will remain larger than it was before the Covid pandemic until 2030.

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

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

Blanc shrugged this off as “random market chatter”. A number of UK companies have attracted takeover interest recently, including Aviva’s rival Direct Line, which rejected a £3.1bn offer from a Belgian insurer as “highly opportunistic” last week.

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

“Certainly, we would say that there’s plenty of room to go in our share price. But we are really focused on the things that are in our control, which is the brilliant performance of the business.”