Founder and Editor
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.
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, you have a choice of where you receive your treatment, and you may even receive a higher standard of treatment.
However, you may be concerned about the cost of your insurance premiums and how claims will affect them over time.
To begin with, most health insurers offer you a range of premiums based on age, gender, health history, health coverage needed and other factors (tobacco users pay 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.
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.
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.
If you're a community scheme member and make a claim, the entire membership bears the future cost of that settlement. While it generally costs more to join a community-rated scheme than a standard health insurance policy, it 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.
The pricing system for health insurance is all about risk. The insurance company wants to minimise the risk of losses by grouping members with a more favourable age or health status and members with higher expected health care costs on large group plans. Community rating means they can lower risk while still providing high-level services.
With traditional health insurance policies, the medical costs you claim affect the renewal price.
If you claim 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.
On the other hand, if you don't claim, you build up a no-claims discount (or bonus), so when it's time to renew, your premiums likely won't change significantly.
Community-rated schemes don't allow you to build up a no-claims discount.
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Only four of the UK's nine leading health insurance providers offer community-rated schemes.
The Exeter is one of the few health insurers that offer community-rated schemes to new customers between the ages of 70 and 80. Other insurance firms only provide cover to younger people where the risk rating is lower.
With The Exeter, insurance carriers can choose between a traditional no-claims discount or a community-rated scheme for their health coverage, which is unique in the marketplace.
WPA is highly rated for its flexible health coverage packages and excellent service. However, its policies are strictly based on age, with health insurance only available when the person's age is under 65. You need to be younger than 65 to take advantage. But, if you're the right age, WPA could be a great option.
Freedom offers a community-rated scheme and is very transparent about how it works. Unlike some providers, they'll offer a discount at renewal if the market for allows it. In 2021, only 0.59% of policies fell outside the community rating at renewal (because of an unduly high frequency of claims), with over 83% discounted. This level of transparency around how the community-rated scheme works is rare and should give people confidence in Freedom.
At National Friendly, things are slightly different. For the first five years of your term with National Friendly, neither your claims nor the community's claims will affect your premiums. Instead, your insurance premiums will vary based on your age and health status inflation.
After these five years, you'll have a review where you'll get new premiums based on factors, including your claims history.
Our experienced health insurance brokers compare different providers and their cover options for you
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Chris Steele is myTribe’s trusted expert in private health insurance and healthcare, with over a decade of experience in the field. As the Founder and Editor of myTribe Insurance Experts, Chris is a Chartered Insurance Institute (CII) qualified professional with certifications in Insurance, Legal and Regulatory (IF1), Healthcare Insurance Products (IF7), and Insurance Broking Fundamentals (I10). Chris’s research and insights are regularly cited by national media, and he has contributed to leading consumer finance publications, simplifying complex topics to help consumers better understand private medical insurance. His expertise spans private health insurance, market analysis, and health insurance regulations, making him a respected voice in the UK insurance market.
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.
The community rating is the risk rating insurers use to calculate premiums for community schemes. It's based on risk factors across the entire group, rather than the individual's age, gender, medical history etc.
There are several different types of community rating:
Pure community rating prevents health insurers from using demographic factors such as age or gender to set premiums.
Modified community rating allows insurers to incorporate age, gender and geographic area (based on risk) when setting premiums.
Make sure you find out how your insurer determines its community rating when you purchase health coverage. Is pure community rating or the modified form best for you?
The advantages of the community rating over the individual market rate are that your claims history doesn't affect your premiums. It's risk-rated across a group of people, rather than just you. Therefore, if only a few community members have claimed their insurance, the community rating will be less risky, and renewal costs could be similar or lower.
In addition, if you have a traditional health insurance policy and you need to claim for something small, you may worry about losing your no-claims discount, decide not to make your claim and not get the treatment you need. With the community rating, you don't have a discount to lose, so if you need treatment, you'll go and get it.
Of the leading health insurers in the UK, The Exeter, WPA, Freedom Health Insurance and National Friendly offer community-rated schemes to their customers. However, each insurer runs its schemes slightly differently. For instance, WPA only provides health coverage to customers under age 65. Ensure you select a scheme with coverage and a pricing system that suits you.
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