July 09 Changes Long Version

Product changes and Rate Review – July 2009

While the PMI market continues to display remarkable resilience, many of our clients are not immune from the harsh realities of the current economic climate. At PruHealth we believe a crucial factor in our success to date is our ability to react quickly and innovatively to feedback from the market. The majority of the feedback we’re receiving at the moment focuses on the fact that employers are willing to take on lower levels of employee rewards in exchange for sharper premiums and lower rates of medical inflation. Based on this feedback we’ve looked at our pricing strategy, a key element of which is the careful balancing of rewards available to employees and the premiums paid by the employer. As a result of this rebalancing combined with several product changes, we are pleased to announce market leading average half year and annualised rate increases for SME business.

Partner changes

Benefit changes

Process changes

Renewal reward changes

PruHealth rate review PruHealth Average New Business increase* (6 month review)

PruHealth Average Renewal increase* (annualised review)

Individual

6%

10%

SME

3%

8%

PARTNER CHANGES – from 1 July 2009

Champneys Summary: No member price increases. PruHealth members may take 1 guest per visit. Only 3 visits allowed per member per policy year. Detail: No member price increases. PruHealth members may take 1 guest per visit. If the guest is a PruHealth member they will be charged according to their Vitality status. If the guest is not a PruHealth member, they will be charged the ‘guest’ rate applicable at time of booking. Guests must share the member’s room. PruHealth members are eligible for 3 visits per policy year. Why the change: The current benefit is structured in such a way that Champneys hold availability in excess of what is being used. Limiting usage from our side allows Champneys to free up capacity without compromising PruHealth availability. We’re simply aligning with historical usage patterns. Effective date: Applies to all new business from 1 July 2009 and existing PruHealth members at renewal.

Fitbug Summary: Introducing new Fitbug. Price moving to £30. Detail: A new look Fitbug will be introduced in June. New features include an alarm clock, total exercise time and aerobic time recorder, as well as an active speed feature which provides an indication of the intensity of the exercise. A bulk deal for certain Corporates (clients with more than 100 employees) will be available - £25 per member. Corporate paid Fitbug is still available. Why the change: Since the introduction of Fitbug 3 years ago we’ve not increased prices, choosing to absorb the effect of inflation rather than passing it on to our members. This remains one of the best ways to move through the statuses. Even at £30 members are still getting great saving on the RRP of £84! Effective date: Applies to all new business from 1 July 2009 and existing PruHealth members at renewal.

Cineworld Summary: All PruHealth members, regardless of status, may ‘buy-one-getone-free’. Detail: Regardless of status, PruHealth members may purchase 1 Cineworld cinema ticket and receive a second free. Only 1 pair of 2-for-1 tickets may be purchased per member per month via the Member Zone. Cineworld Unlimited Card holders are not eligible for this offer. The free ticket must be used at the same screening as the paid ticket. Why the change: A great benefit, accessible by all statuses. Effective date: Available to all new business from 10 July 2009 and existing PruHealth members at renewal.

Nuffield Health The Diagnostic Clinic road to health Boots Summary: Screening eligibility changes. Detail: PruHealth will now subsidise a maximum of 2 health screens per member per year. Only 1 of these may be a full health screen. A member therefore may be subsidised for 2 basic screens, or, 1 basic screen and 1 full screen. Members may still have more than 1 full screen per year, however we will only subsidise 1. Should a member wish to have a second full screen during the policy year they will have to pay the full retail price. Points for screens remain the same: 400 points for a full screen; 200 points for a basic screen. The maximum number of points that can be earned through the entire Screening category remains unchanged as well at 800 per year. Why the change: Having more than 1 full screen per year is not proven to be clinically beneficial. Therefore we’ve tightened the rules to maintain the integrity of the product and avoid situations where a member might undergo an unnecessary screen simply to earn points. Effective date: Applies to all new business from 1 July 2009 and existing PruHealth members at renewal.

Nuffield Health The Diagnostic Clinic Summary: Screening price changes. Detail: Current prices for Nuffield Health and The Diagnostic Clinic screens are set out in the table below. New prices are in red. Retail price

Member price Bronze

Silver

Gold

Platinum

£40

£25

£25

£25

£25

£59.95

£25

£25

£25

£25

The Diagnostic Clinic

£150

£50 / £60

£30 / £50

£15 / £40

£5 / £30

Nuffield Health – Vi3 (female)

£265

£160

£120

£70 / £75

£15 / £40

Nuffield Health – Vi4 (male and female)

£225

£160

£120

£70 / £75

£15 / £40

The Diagnostic Clinic

£500

£250

£175

£100 / £110

£25 / £55

Nuffield Health – Vi5 (male)

£430

£250

£175

£100 / £110

£25 / £55

Nuffield Health – Vi5 (female)

£455

£250

£175

£100 / £110

£25 / £55

Nuffield Health – Vi6 (male)

£590

£375

£275

£175 / £185

£75 / £100

Nuffield Health – Vi6 (female)

£605

£375

£275

£175 / £185

£75 / £100

Basic screening Boots road to health

Full screening

Why the change: We’ve never adjusted the pricing of our health screens. Now that we are making a change, we’re restricting where possible, increases to the higher statuses. We’ve done this to ensure that the cost barrier for members on Bronze and Silver remains as low as possible. Effective date: Applies to all new business from 1 July 2009 and existing PruHealth members at renewal.

BENEFIT CHANGES Rehabilitation benefit Summary: From 1 July 2009 the benefit for rehabilitation will be 30 days. Why change: To bring ourselves into line with the rest of the market. Effective date for GROUPs: Applies to all new GROUP business from 1 July 2009 and existing PruHealth members at renewal. Effective date for INDIVIDUALs: Applies to all new INDIVIDUAL business from 16 July 2009 and existing PruHealth members at renewal.

PROCESS CHANGES – from 1 July 2009 Vitality Review Summary: From 1 July 2009 members will need to complete their Vitality Review in order to unlock next year’s renewal reward. Detail: We will not pay out cash back or increase a member’s PHF in the 2010 renewal cycle unless they have completed their Vitality Review. Why the change: We have some members who do not engage with Vitality at all and yet still receive a cash back reward. Rewarding inaction undermines our whole philosophy – Vitality was set up to reward people for the effort they make to look after their health. We will no longer ‘waste’ incentives on people who do nothing. The Vitality Review was designed as the first step on the road to full engagement. Starting in 2010 we will only reward those who make the effort to take that first step. Driving members to complete their Review will not only help drive engagement, it will also promote our online functionality. There is also a positive spin-off for group schemes. When 20 or more employees complete the Vitality Review, the Employer is entitled to the Vitality MI relating to their scheme. Driving members to complete the Vitality Review will therefore increase the value Employers can extract from the product. Effective date: Promoted to all group schemes from 1 July 2009.

Cash back payment Summary: Cash back is currently paid as a cheque. From August 2009 we will simply transfer funds electronically to member’s bank accounts (BACS). Detail: Prior to this year’s cash back payment members will be notified that an electronic payment option is available and that they can either log on the Member Zone or call us to provide their bank details. When it comes time to pay the cash back, we’ll do so electronically. Initially, to smooth the transition, we’ll send a cheque automatically if we have not received any bank details. Why the change: Paying by electronic funds transfer rather than sending a cheque is a cleaner, quicker and more efficient way of distributing the cash back. There is less room for error or delay. We believe that an electronic transfer is more in line with today’s customer lifestyles and expectations. It is also more in line with our move towards digital servicing. Effective date: Promoted to all group schemes from 1 July 2009.

RENEWAL REWARD CHANGES SME renewal rewards Summary: Introduction of lower or standard renewal rewards to reduce the impact of the rate review by 3%. New business details: Groups will be quoted on our new standard renewal reward levels which are lower than the current levels. This will soften the impact of the half year rate increase, in effect reducing the increase by 3%. Groups will still choose their renewal reward – an increase to the Personal Health Fund or cash back. If no decision is made, the default option will be the increase to the Personal Health Fund. Renewal details: Renewal premiums for existing groups will be calculated using our new standard renewal reward levels. This will soften the impact of the annual rate increase, in effect reducing the increase by 3%. The group may ‘buy up’ to retain the higher level of renewal rewards which will attract a premium that is approximately 3% higher. The new renewal reward levels for the Personal Health Fund and cash back are set out in the table on the next page. Please note – if an employer chooses the Personal Health Fund, their employees will have available to them 50% more than the cash back amount which they may use to pay for certain health-related services not usually covered by PMI. This increase to the reward is called the Personal Health Fund booster. Why the change: Feedback from Brokers and SME employers has indicated that whilst our reward structure is essentially sound, it may be too top-heavy in terms of the reward levels at higher statuses for some employers. In the current economic climate we are being told that employers would happily trade-off the higher levels of renewal rewards for lower premium. The result is half year and annual rate increases that lead the market. Effective date: Applies to all new business from 1 July 2009 and existing PruHealth members at renewal.

Table 1: Standard Personal Health Fund Booster and cash back levels PERSONAL HEALTH FUND BOOSTER TOTAL CLAIMS

BRONZE

SILVER

GOLD

PLATINUM

CASH BACK BRONZE

SILVER

SINGLE £0

GOLD

PLATINUM

SINGLE

£37.50

£75

£150

£225

£25

£50

£100

£150

£1 to £250

£0

£37.50

£75

£150

£0

£25

£50

£100

£251 to £500

£0

£0

£37.50

£75

£0

£0

£25

£50

£501 to £1,000

£0

£0

£0

£37.50

£0

£0

£0

£25

£1,001 +

£0

£0

£0

£0

£0

£0

£0

£0

FAMILY £0

FAMILY

£75

£150

£300

£450

£50

£100

£200

£300

£1 to £250

£0

£75

£150

£300

£0

£50

£100

£200

£251 to £500

£0

£0

£75

£150

£0

£0

£50

£100

£501 to £1,000

£0

£0

£0

£75

£0

£0

£0

£50

£1,001 +

£0

£0

£0

£0

£0

£0

£0

£0

Corporate renewal rewards Summary: Introduction of lower or standard renewal rewards to deliver sharper premiums. New business details: All quotes will now be based on our new standard renewal levels. The standard renewal level equates to reward table 3. Employers will have the option to ‘buy up’ to higher levels of rewards which will attract increased premiums. Renewal details: Renewal quotations will be created based on the employer’s current renewal reward selection (table 1, 2 or 3). We will also provide an illustration demonstrating the possible savings that could result from selecting a lower level of renewal rewards. Why the change: In the current climate we are receiving more and more requests to quote using the lowest level of renewal rewards. We are therefore changing the default setting to reflect what is happening in the market. Effective date: Applies to all new business from 1 July 2009 and existing PruHealth members at renewal.

PRUHEALTH RATE REVIEW – 1 JULY 2009 As a result of the changes outlined above we are delighted to be able to deliver a minimal increase in premiums. PruHealth Average New Business increase* (6 month)

PruHealth Average Renewal increase* (annualised)

Individual

6%

10%

SME

3%

8%

We’ve listened to what you’ve told us. We’ve worked hard to develop a solution and bring it to market quickly.

The result is market leading half year and annualised increases for SME business. We’ve done this without compromising the quality of the cover we offer. We’ve done it by improving the integrity and efficiency of our Vitality programme. And we’ve done it by increasing the value of our product to the customer through the changes we’ve made to our Vitality partner offerings.

*Premium increases shown are average base rate increases and do not include changes in factors such as age, excess, no claims discounts etc. Points to Note:





Corporate rates will not be affected by this change.





New quotes for July 2009 will be issued with these changes factored in.

Any quotes already issued with a July 2009 start date will be reissued to reflect the new rates and pricing changes The next review will take place on 1 January 2010 – this does not necessarily mean that we will increase rates twice a year, only that our premium rates will be reviewed.