One of the smallest players in UK health insurance is to withdraw from the £2 billion sector just six years after first entering the market.

Cornhill Insurance, which has less than a one per cent share, will cease writing business from the end of the month. The company said that it had taken the view that healthcare would remain unprofitable for smaller players over the long term.

"Unless you can see some likelihood of a return to profitability then you have little choice but to make some difficult decisions," said life general manager, Ian Reed.

The wider environment was also operating against the company with premium increases of up to 20% applied by other players.

"We would have needed to increase our own premiums to such a degree that we would have lost too much business to remain a viable carrier," he added.

There are no plans for compulsory redundancies amongst the 23 staff affected and existing contracts will be honoured until expirey.

Cornhill started underwriting healthcare business in 1993 and by last year had 3,080 group healthcare policyholders and 3,250 individual policyholders, generating a gross written premium of £12m.

Meanwhile, two major providers of healthcare benefit schemes have joined forces to become the second largest healthcare cashplan provider in the country with 250,000 customers and a value in excess of £35m.

The newly-formed Healthsure Group brings together the Manchester & Salford Hospital Saturday Fund and the Northampton-based Healthcare Insurance Alliance.