What is a community-rated health insurance scheme?

In this article, we look closely at community-rated health insurance. We explain what it is, the pros and cons, and also show you where you can buy community-rated policies. Finally, we answer all your burning questions on community ratings and how they work.

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Introduction to private healthcare in the UK

While healthcare is free in the UK thanks to the NHS, many people prefer to hold private health insurance too. When you go private, you can often be seen by a doctor much faster and you have a choice of where you receive your treatment.

However, you may be concerned about the cost of your insurance premiums and how claims will affect them over time.

Health insurance premiums are based on a variety of factors

To begin with, most health insurers offer you a range of premiums based on age, health history, health coverage needed and other factors (some insurers charge smokers more, for example). A general rule of thumb with insurance is the more claims you make, the more it costs to renew your policy. On the other hand, if you don't claim, you build up a no-claims bonus, and you'll see lower costs.

A community rating works differently from a no-claims discount

Community-rated health insurance schemes set premiums using different criteria from standard insurance, as illustrated above. If you are worried that you may make more claims than average or are concerned about the impact of one large claim, community-rated schemes could help you pay less in the long term.

What does community-rated mean?

Community-rated means that insurers base their future premium rates on the claims made by the entire membership of the scheme rather than members' individual claims. If you're a member of such a scheme, your personal claims do not affect your renewal costs. The price you pay depends on the community rating.

The cost of claims is spread across the membership

If you're a community scheme member and make a claim, the entire membership bears the future cost of that settlement. A community-rated scheme can work in your favour, particularly if you make a claim.

For example, if your insurance company has not had many payouts over a year (even if you have claimed), your renewal premium won't rise significantly. The risk is that if your insurer has settled many claims, you'll likely see higher premium rates, even if you haven't claimed.

How does it differ from a traditional no-claims discount?

With traditional health insurance policies, the medical costs you claim affect the renewal price.

If you claim on your health plan, you will pay higher premiums to renew your policy. If you claim many times or make one large claim, your renewal cost could rise significantly.

Benefits of a community-rated scheme

Your claims history doesn't affect your premium at renewal. Premiums based on the risk rating of the group take precedence.
You can make a claim without worrying about losing your no-claims discount. If you need medical services, go ahead.
If your insurer has a good year, your premiums won't increase much.

Disadvantages of a community-rated scheme

You can't build a no-claims discount, so you could lose out if your medical history is good and you rarely claim.
If your community insurer has an expensive year with multiple payouts, your premium could rise by a more considerable amount than if they only looked at your personal history.

Which health insurers offer community-rated schemes?

At the moment, National Friendly is the clearest example among the UK's ten leading health insurance providers of renewal pricing built around community rating. Its My PMI policy is a five-year contract: your premium is reviewed every year, but your own claims don't affect it during those five years. Instead, it reflects the claims paid across National Friendly's similar policies, alongside your age and postcode. At the end of the five years, the price of your new contract may take your claims history into account. The Exeter previously offered community-rated premiums but has moved away from community rating for new customers in recent years.

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Frequently Asked Questions

What's the difference between a no-claims discount and community rating?

Traditionally, if your health status is good and you don't need to claim on your health insurance, you build up a no-claims discount. This means that when the time comes to renew your policy, you'll likely see lower increases in your premiums as you're risk-rated lower by your insurer.

The community rating is the risk rating of the entire membership of the health insurance scheme. Because you're part of a group, you can't build up a no-claims bonus. Instead, community rating determines whether you pay lower or higher premiums at renewal time.

What is community rating in health insurance?

Community rating is a way insurers can set your renewal price. Instead of looking at your own claims, the insurer bases it on the claims made across everyone in the scheme. It doesn't mean everyone pays the same. National Friendly's My PMI, for example, still takes your age and postcode into account. And UK insurers can't use gender to set premiums on policies taken out since 21 December 2012.

What are the advantages of community-rated health insurance?

Your own claims don't affect your renewal price, because it's based on claims across the whole membership. If few members claim in a year, your premium won't rise much. You also have no no-claims discount to lose, so you won't be put off claiming for something small that you need treatment for. With National Friendly's My PMI, your claims are ignored for each five-year contract; the price of the next contract may take them into account.

Which health insurers offer community-rated schemes in the UK?

Of the UK's ten leading health insurers, National Friendly is the clearest example of renewal pricing built around community rating at the moment. Its My PMI policy is a five-year contract, and your own claims don't affect your premium during those five years.