Personal PMI uptake fails to mirror corporate boom

Health and wellness rather than the tedium of insurance is increasingly the focus of private medical insurance.

Cheap gym memberships, an emphasis on preventing illness and discounts for not smoking or claiming characterise the current market.

But, while some responsible drinking may be allowed, the latest figures on the state of the medical insurance market are clear that this is not the time to crack open the champagne – a small shandy is more the order of the day.

Analyst Laing & Buisson shows that for the first time in three years, the number of people with PMI polices has increased – albeit by a measly 1% – to total 4,188,000 at the start of the year.

Growth is in the corporate market – and so it’s clear that brokers are doing a good job – they dominate this sector. Company cover – largely the SME market – rose by 3.4%, while the self-insured sector, which is favoured by the largest businesses, was up 1%.

It is less rosy in the individual market. Here Laing & Buisson says sales are down 2.2%, with the number of individual policyholders falling from a peak of 1,457,000 in 1996 to a low of 1,097,000 at the end of 2006.

There is no doubt that the NHS is far from perfect and many are concerned about the cleanliness of hospitals. But the cost for many people buying their own insurance remains prohibitive.

Pru Health, which launched three years ago, is the insurer of the moment. It has just announced a link-up with Sainsbury’s, which means policyholders can earn Vitality points when they buy fruit and vegetables. Vitality is a rewards programme that gives policyholders a discount if they don’t claim.

Pru Health also offers a deal with Boots and discounted membership of gyms.

Although the company sells direct, it is also winning plenty of business through intermediaries, according to Pru Health sales director Dave Priestley.

He says despite the poorly performing individual market his company is seeing rising sales in this area.

“People just don’t see value in most plans so we’ve bucked the trend with Vitality. It’s right that insurers address the issue of health.”

Vitality can also be used in the corporate market. Priestley comments: “Since the start, we’ve had some really supportive brokers, while others have been more conservative.

“In terms of the SME sector, we’re finding smaller firms can now offer the same cover as a big company and, if there are fewer claims, then there will be a price advantage.”

“The focus should be on the insurance and what you get - the emphasis on the healthy living stuff is a bit glitzy

Jan Lawson, PHP

But, not everyone is bowled over by Pru Health. Private Health Partnership managing director Jan Lawson says she likes innovation and gym membership and similar schemes may appeal to some customers.

But, she says: “The focus should be on the insurance and what you get – the emphasis on the healthy living stuff – is a bit glitzy. A lot of people buying PMI will already be aware of preventative healthcare measures and some may be working too hard to spend much time in the gym.

“I would question whether many PMI buyers are the sort of people who are interested in points schemes.”

She says that as a broker advising clients there is still much to recommend in traditional insurers, pointing out, for example, that Bupa’s reputation for cancer treatment is second to none.

“Ultimately a no frills comprehensive plan can be the best option.”

One of the key trends in recent years has been the development of modular PMI plans, where there is greater choice in what cover is purchased.

But Lawson says: “Again, there is nothing wrong with these, but there can be moral issues. For example, if I am speaking to an employer on a tight budget, it is hard to tell him to strip out, say, mental illness or cancer to reduce the cost of the policy.

“It could be that excluding outpatient cover, as in the traditional budget plan, is better. But even here, the costs for tests and physio, for example, can be considerable if they have to be met individually.”

Meanwhile, Colin Boxall, a partner with broker Excellent Health, says the fact the group sector is growing has had a corresponding effect on the individual market. More people now have insurance through work and so don’t need to buy it themselves.

He argues although insurers say they back brokers, many need to buck up their ideas when it comes to service.

He says some have poor working practices. “Quotation systems are not linked, leading to duplication, information is not shared and the basics of service provision not followed.”

Brokers like Boxall find call centres can be slow to respond, invoicing can be wrong and general tardiness all add to his costs and can damage his firm’s reputation. He emphasises not all insurers are dire, pointing out that Permanent Health Company (PHC), for example, hits the mark but others struggle with the most rudimentary levels of support.

His message to insurers is to put aside clever marketing strategies and return to the basics.

PHC sales and marketing director Sally Moore says she agrees the industry is lagging behind in its online development and says this needs to be developed in the future.

“If we were to make cover far more widely available this could be like top-up cover, where people would rely on the NHS

Nick Homer, NU Healthcare

She adds that good service remains a priority for brokers. “They want someone to answer the phone, they don’t like call centres and, although companies like Pru Health are innovative, their products do tend to have more appeal for younger customers.”

She also questions whether modular cover is the be and end all. “There is a place for it, but comprehensive cover is simpler for customers and most brokers still prefer this.”

But comprehensive PMI is always going to be expensive. And if products are going to become mass market, there has to be an alternative.
Nick Homer, head of propositions for Norwich Union Healthcare, says the industry faces challenges.

“Discounts on being healthy and fit is one thing, but all the time medical developments are improving and the cost of drugs increasing.

“People buy cover to pay for treatment – and while we support no claims discounts, you have to expect some big claims.

“If we were to make cover far more widely available this could be like top-up cover where

people would rely on the NHS, but have insurance for areas where provision is less good.

“You might also get cheaper options – perhaps products for certain conditions such as cancer or maybe physio. You can’t have it all ways.”

Lawson concludes: “Having an excess does make a difference. This does not have to be high, say £250 to £500 per person a year.

“But ultimately, if someone wants good cover, as with any decent bit of kit, you have to pay for it.

“The press needs to do more than just say how expensive PMI is. It needs to show what treatments cost too.”

She predicts the individual market will remain relatively limited, but corporate growth will continue.

“The economy is still strong and it’s notable more companies realise they have to work at staff retention as well as managing absences more efficiently.

“In the past PMI was often a senior executive perk – now bosses realise covering everyone is a better strategy.”