Health insurance: it pays to be a good sport

Buying a running machine on eBay may not just be the first step towards a fitter lifestyle, it could also cut your private health insurance premiums.
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Health insurers have been going to increasingly extreme lengths to get policyholders to improve their lifestyle in return for lower premiums in the knowledge that the less unfit their pool of customers, the less they will have to pay out in claims.

PruHealth has been at the forefront of getting under the skin of customers' lifestyles to motivate them to behave in a way that reduces the likelihood of claiming on their policies.

It already offers free or discounted gym membership as well as substantially reduced premiums for people who can prove they are healthy ¨C whether by wearing a pedometer to show that they walk a lot or downloading healthy diets. The company even cuts premiums for every £2 that policyholders spend in the fresh fruit and veg aisles in their supermarket.

PruHealth's latest incentive is a scheme that reduces premiums for anyone who buys certain qualifying sports and health goods on eBay. Spend between £5 and £500 on health and fitness goods, from trainers to treadmills, and your premiums will go down.

While some insurers give straightforward no-claims discounts, PruHealth's incentive scheme is not so simple. Policyholders earn "vitality" points for participating in a range of activities, such as giving up smoking, using a gym or even downloading healthy eating plans.

The number of points you earn in any year governs your "vitality status", which determines the size of your no-claims discount the following year.

All policyholders are automatically at "bronze" level in their first year. Then, provided that they do not make a claim, their basic premium will automatically be reduced by 25 per cent in the following year.

But if they manage to earn 1,000 vitality points they move up to "silver" status, which will slash their premiums in half; to get to gold status and a 75 per cent no-claims discount they need to rack up 1,500 vitality points, while 2,000 points will earn a maximum 100 per cent discount (platinum level) on their basic premium. But health cover is not totally free for these policyholders as they still have to pay medical inflation and age-related increases, as do all other customers.

Spending as much as £500 on sporting goods in a year will earn you 120 vitality points, while £2 a week on vegetables will give you 520 points ¨C half way to silver status. Going for a fitness assessment will boost your points total by 300, while visiting the gym twice a week will earn you as many as 1,040 points.

There is no point in getting a discount on a product that is substantially more expensive than its competitors, and undiscounted PruHealth premiums are not the cheapest on the market. This is why healthcare advisers say the product is worthwhile only for the right sort of customer. If you turn into a couch potato and slip down to bronze status again, you will lose your discount in the following year.

"People need to know what they are capable of when they are taking out a PruHealth policy," says Samantha Knight of Chase Templeton, a private medical insurance specialist. "Some people are too busy to go to the gym or know they won't really be able to change their lifestyle, so they may never get beyond bronze status."

Knight recommends the PruHealth plan for anyone who thinks they can maintain a healthy lifestyle, because the discounts they will earn will make their premiums among the lowest on the market. But for different sorts of customer there may be more suitable products.

A healthy 30-year-old female non-smoker living in London would pay premiums starting at £50.62 a month for a comprehensive plan through PruHealth, while Health Online, a subsidiary of Axa, would charge £47.44 and Norwich Union Healthcare would charge £42.68.

Taking into account medical inflation and age-related increases, a bronze PruHealth customer would see that premium rise to £62.92 in year two, while someone achieving silver status would pay £46.92. Customers earning gold stars would pay £26.76 while those in the platinum club would see premiums fall as low as £9.08.

"If you know you aren't going to be able to change your lifestyle and you want a cheaper starting rate, Norwich Union may be suitable, although its choice of hospitals is more limited than competitors'," says Knight. "Healthcare Online is slightly more expensive but has a good hospital list and you would see an automatic no-claims discount over the next few years if you didn't claim.

"But for people who go to the gym and lead a healthy lifestyle, PruHealth will work out cheapest in the long run. For anyone already signed up to Cannons, LA Fitness or Virgin Active, the saving on membership alone will outweigh the cost of cover."

You can also bring down your life and critical illness cover costs by adopting a healthy lifestyle through PruProtect. Operating through the same vitality points system, you can reduce your premiums every year.

A 30-year-old non-smoking female would pay £28.42 a month for life insurance and serious illness cover ¨C a more extensive form of critical illness cover ¨C of £100,000. By amassing enough vitality points, she could reduce that premium by 2.25 per cent a year, every year, up to a maximum decrease of 45 per cent. But for anyone whose new fitness regime goes to pot, prices will go up by 2.25 per cent, again to a maximum 45 per cent, for every year they wallow in the bronze category.

Because PruProtect's serious illness cover is different from those offered by other providers it is difficult to say how reasonable this quote is, but advisers say that, taking into account the extras you can get, it is a good deal if you are the sort of person who will use them.

"Without discounts, PruProtect comes in at a good price anyway, and for the right kind of individual, who has one of the qualifying gyms near their home or work and actually goes to it regularly, PruProtect is a good bet," says Kevin Carr of Lifesearch, the specialist adviser.

"But at this time of year lots of people make resolutions about how they are going to change their lifestyle that they never manage to stick to. If you are going for this product, you need to be honest with yourself about what you are likely to achieve."

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