Private healthcare experts are projecting a drop in demand for medical insurance as premium prices rise to cover losses estimated at£50m or more.

Laing and Buisson's Private Medical Insurance UK Market Sector Report 1999 says underwriting losses in 1998 and an ensuing rise in the cost of this year's premiums 'may lead to a loss in demand' across the market. The estimated loss is based on figures from 'industry sources'.

'In 1999, insurers will pass on costs to customers in the form of higher than average premiums which may lead to a loss of demand and probably more downgrading,' the report says.

The losses are blamed on a rise in the number of claims, with the cost of claims per subscriber almost doubling in real terms since 1997.

Factors behind the rise include subscribers 'bringing forward their consumption' for fear of being unable to afford rising premiums, and an increase in referrals from GP fundholders trying to reduce demands on their budgets.

The report says 'increasing claims from medical technology' remain the 'principal long-term driver of real growth'.

The predicted drop in demand this year may be followed by 'moderate growth' in 2000 and 2001, with demand unlikely to pick up until 2002.

The report shows that the number of private medical insurance subscribers grew by 3.6 per cent in 1998, to 3.57 million.

That contrasted with 'essentially flat growth' between 1991 and 1997, when subscribers rose by only 4.5 per cent throughout.

But it says the figure masks a 'polarisation' within the market, with a rise in company-paid subscriptions covering a marginal fall in individual customers.

Figures for December 1998 show company-paid subscriptions covering 7.6 per cent of the UK population, compared to 3.9 per cent made up by 'other' private medical insurance.

The report predicts a continuation of this trend in the long term, with growth expected to 'occur solely in the company-paid sector'.

Private Medical Insurance UK Market Sector Report 1999. Laing and Buisson,

0171-833 9123.£280.