private medical insurance (PMI) looked set to mushroom, with new private hospitals springing up all over the place.

In anticipation of the extra demand, and with our buoyant economy, it wasn't unrealistic to think the PMI market would grow and grow as we heard all the criticism about a failing National Health Service.

However, it would appear the anticipated increase in demand for PMI cover has started to reduce, with a reported fall last year of 4.5 per cent in the number of people with private medical insurance cover in the UK.

The sector reported recently in the national Press that the biggest reduction was the individual market, which fell by five per cent, although company-sponsored PMI cover rose slightly by 1.2 per cent.

Although PMI has great benefits for those who enjoy the protection, I'm not totally surprised by the fall in numbers of people covered.

After all, if you have a life-threatening condition like a heart attack or you're involved in an accident, you will probably end up in the local NHS hospital whether you have insurance or not!

This, coupled with the hike in PMI premiums over the last few years and the previous loss in tax relief, could arguably lead one to think it may be better to save the premium you would have paid into the insurance contract and pay quickly out of savings for anything the NHS wouldn't cover.

Although this course of action would appear to be very risky, I can understand the logic.

One of the biggest problems with PMI is it is quite a complex insurance contract.

Companies offer different levels of cover. Some have extended deferment periods before a claim is met and some contracts are medically underwritten but not all.

However, most have pre-existing condition exclusions.

All of this inconsistency has had, in my opinion, an adverse effect on the merits of some of the contracts on offer in the market place.

Again in my opinion, PMI will never be a popular alternative to the the NHS until a couple of things happen.

Firstly, the premiums must be kept to a reasonable level across the board, and secondly, there must be more uniformity across the contracts on offer.

This is assuming of course the NHS won't finally give up the ghost and stop working!

Wilbury Financial Management is a member of IFA Network Ltd, which is regulated by the Personal Investment Authority. The PIA does not regulate PMI.