VitalityHealth is to change its renewal pricing approach for individual private medical insurance (PMI) policies within the guidance of a new Fair, Intuitive and Transparent or 'FIT' framework.
Claims and wellness engagement measures will be factored in as one of the new measures, meaning that wellness engagement will determine PMI renewal premiums for policyholders.
The insurer described the industry-standard no claims discount (NCD) rating structure as opaque and said that it could "produce volatile premiums on renewal."
The FIT framework will ensure a fairer, more intuitive and more transparent pricing approach for VitalityHealth members, the insurer said.
Under this approach, renewal premiums will be based on an ‘ABC' model which takes into account increasing Age; the Base medical inflation rate; and a new Claims and wellness engagement measure.
Neville Koopowitz, CEO of Vitality, said: "These changes are ahead of the market and go beyond the regulatory requirements around premium transparency to be enforced from April 2017.
"The no claims discount is a misnomer; it is more of a claims penalty. Sharp increases often follow even small claims, which negates the insurance cornerstone of collective risk sharing.
"Additionally, the current NCD structures can be confusing. For example, people may believe that a movement from 65% to 55% on the NCD scale equates to a 10% premium increase, when in reality this equates to a nearly 30% premium increase - and this excludes the effects of age and inflation.
"We believe that no customer should ever be surprised when they get their VitalityHealth renewal, which is why we have introduced this new framework."
£1m target for Cancer Research UK
Regulator warns of risk to over-55s
Group led by Ed Dymott
Don’t pay for familiarity
Investment sector reaction