Private Health Insurance UK: What It Covers, Costs and FCA Regulation

What private medical insurance actually is

Private medical insurance, often called PMI or private health cover, is an annual general insurance contract that pays for eligible private treatment. It does not replace the National Health Service; it runs in parallel, giving faster access to consultations, diagnostics and surgery for certain conditions, usually in private hospitals or private wings of NHS hospitals. The Financial Conduct Authority regulates PMI as non-investment insurance, which means firms selling it must follow the Insurance: Conduct of Business Sourcebook and the Consumer Duty.

The product is designed around the concept of acute conditions: short-term illnesses or injuries that respond quickly to treatment and can be cured or brought back to how the policyholder was before. A torn cartilage, a cataract, a hernia or a newly diagnosed cancer would typically be acute. Conditions that need indefinite management, such as diabetes, asthma or chronic kidney disease, fall outside most policies once they become long-term.

Because PMI is an annual contract, the insurer reprices and can re-underwrite at each renewal. The headline premium, the excess and the hospital list can all change year to year, which is why reading the renewal documentation closely matters as much as reading the original policy.

What a standard policy covers

Core cover on most UK PMI plans centres on in-patient and day-patient treatment: hospital stays, surgery, anaesthetist and surgeon fees, nursing and the cost of a private room. This is the part that delivers the headline benefit of skipping NHS surgical waiting lists for eligible procedures.

Many plans then add out-patient cover as a module or an upgrade. This pays for specialist consultations, diagnostic scans such as MRI and CT, blood tests and physiotherapy that do not require a hospital admission. Out-patient cover is frequently capped at an annual monetary limit, so a plan may pay specialist fees up to a set amount and then stop.

Optional extras commonly bolted on include:

• Cancer cover extending beyond the acute phase to ongoing drugs and therapies, sometimes including drugs the NHS has not approved.
• Mental health cover with its own day or session limits.
• Therapies such as physiotherapy, osteopathy and chiropractic.
• Dental and optical cash benefits on more comprehensive plans.

The exact blend is set when the policy is bought, and the policy schedule, not the marketing brochure, is the document that governs what is actually paid.

How underwriting decides what you are covered for

Insurers use two main underwriting approaches. Under full medical underwriting, the applicant declares their medical history up front and the insurer confirms in writing which conditions are excluded. Under moratorium underwriting, no medical history is declared at the start, but anything treated, investigated or symptomatic in a defined look-back period (commonly the previous five years) is excluded until the policyholder has gone a continuous period, often two years, without symptoms, treatment or advice for it.

Both routes are designed to keep pre-existing conditions out of cover. The practical difference is timing: full underwriting gives certainty on day one, while moratorium underwriting can leave it unclear whether a future claim relating to an old condition will be paid until the claim is assessed.

Whichever route applies, the duty on the consumer is set by the Consumer Insurance (Disclosure and Representations) Act 2012, which requires applicants to take reasonable care not to make a misrepresentation when answering the insurer's questions. Honest, careful answers protect the right to claim later.

The FCA rules that protect policyholders

Several layers of regulation sit on top of PMI. The Insurance: Conduct of Business Sourcebook (ICOBS) governs how the product is sold, what information must be given before purchase and the cancellation rights afterwards. ICOBS 6 requires clear, fair and not misleading information, including a policy summary highlighting significant exclusions.

The Consumer Duty, in force across general insurance, requires firms to deliver good outcomes, avoid foreseeable harm and provide products that offer fair value. The FCA has used its general insurance pricing rules to stop the practice of charging loyal renewing customers more than new customers for an equivalent policy, the so-called loyalty penalty.

If a claim is declined or a complaint is not resolved within eight weeks, the policyholder can escalate free of charge to the Financial Ombudsman Service. The FOS can direct an insurer to pay a claim or compensate the consumer where it finds the firm acted unfairly, and its decisions are binding on the firm once accepted by the consumer.

Where PMI stops and the NHS takes over

Private cover is not a substitute for the NHS, and several major areas remain firmly NHS territory. Accident and emergency treatment, ambulance call-outs and trauma care are handled by the NHS; PMI does not run emergency departments. Routine GP services, although some plans now add a virtual GP benefit, remain an NHS function for most people.

Long-term and chronic care also sits outside PMI by design. Once a condition becomes chronic, ongoing management typically reverts to the NHS. Maternity care, organ transplants, dialysis for established kidney failure and most pre-existing conditions are commonly excluded. Anyone relying on private cover should keep their NHS registration and not assume PMI fills every gap.

The interaction can also work the other way: a policyholder may have a private consultation and diagnosis, then choose NHS treatment, or use the NHS for emergency stabilisation before transferring to private care for elective surgery. Understanding which system covers which stage avoids unexpected bills.

Buying, renewing and switching

PMI can be bought individually, as a couple or family plan, or provided by an employer as a group scheme. Employer-provided cover is usually a taxable benefit in kind, meaning HMRC treats the premium the employer pays as income for the employee, who pays income tax on it via the P11D process.

At renewal, premiums commonly rise with both medical inflation and the policyholder's increasing age. Switching insurer is possible, but a new full-underwriting application could re-exclude conditions that built up during the previous policy, so many people switch on a continued moratorium or continued personal medical exclusions basis to carry forward their existing cover position rather than starting underwriting afresh.

Before buying, the documents that matter most are the policy wording, the schedule and the Insurance Product Information Document. These set out the excess, the hospital list, the annual limits and the exclusions that decide whether a future claim is paid.

Frequently asked questions

Does private health insurance replace the NHS?

No. PMI runs alongside the NHS and covers mainly acute private treatment. Emergencies, A&E, most GP care and long-term chronic care remain with the NHS, and policyholders keep their NHS registration.

Is private medical insurance regulated by the FCA?

Yes. The FCA regulates PMI as a general insurance product under ICOBS and the Consumer Duty. Firms must give clear pre-sale information and treat customers fairly, and disputes can go to the Financial Ombudsman Service.

Can I cancel a new policy if I change my mind?

Most retail PMI policies carry at least a 14-day cooling-off period under ICOBS 7. Cancelling within that window usually entitles the policyholder to a refund, less any cover already used, subject to the policy terms.

Are chronic conditions covered?

Generally no. PMI is built around acute conditions that respond to treatment. Once a condition becomes chronic and needs ongoing management, it typically falls outside cover and reverts to the NHS.

Is employer-paid cover taxed?

Usually yes. HMRC treats employer-paid PMI as a benefit in kind, so the employee normally pays income tax on the premium value reported on the P11D.