My piece in this month’s Health Insurance magazine, encouraging PMI brokers to take up the new ‘Health and Protection’ qualification from the Chartered Insurance Institute.
Click the thumbnail to download the PDF.
As anticipated in my last post, Bupa has today announced that it will be reinstating cover for 34 BMI hospitals with immediate effect.
The three hospitals that will remain out of Bupa’s network are the BMI Gisburne Park Hospital, BMI Lancaster Hospital and BMI Castle Consulting Suite.
Today’s Telegraph is carrying an article by Ian Cowie about Bupa removing cover for 37 BMI hospitals from 1 January. This development has understandably caused concern for Bupa policyholders who use, or would want to use, their local BMI hospital. The insurer has stressed, though, that it will continue to cover the de-listed hospitals where patients are in the middle of treatment.
Bupa has come under fire for this strategy but has countered that, if it does not take steps to control costs, already high premiums will eventually become unsustainable. The insurer has said that BMI had requested prices that were ‘over 20 per cent more expensive than at least one other hospital group, despite in our view offering no better quality of service.’
Whatever the merits of this argument, it is disappointing that Bupa’s members and BMI’s patients have been dragged into what has become a very public spat. Negotiations are apparently ongoing and given that the current impasse benefits neither Bupa nor BMI, there is a good chance that the situation will eventually be resolved. Affected Bupa members may therefore wish to wait and see how the situation develops before taking any action.
Choice is a key driver for consumers to take out private medical insurance, so it is a risky strategy for Bupa to de-list the hospitals completely rather than charge an additional premium to cover them. Rival insurers have made hay on the issue of choice, but hospital coverage is only one aspect of a policy’s suitability and may be less important than securing ongoing cover for pre-existing conditions.
At the end of his article, Mr Cowie suggests that this development vindicates cynics who claim that ‘medical insurers of all descriptions are in business to lend out umbrellas - until it starts to rain’. Having assisted hundreds of clients with their claims over the years, this is certainly not my experience of private medical insurers—and especially not of Bupa.
The 37 hospitals are as follows:
BMI Alexandra Hospital
BMI Bath Clinic
BMI Beaumont Hospital
BMI Bishops Wood Hospital
BMI Castle Consulting Centre
BMI Clementine Churchill Hospital
BMI Coombe Wing
BMI Droitwich Spa Hospital
BMI Duchy Hospital
BMI Edgbaston Hospital
BMI Esperance Hospital
BMI Fawkham Manor Hospital
BMI Foscote Hospital
BMI Gisburne Park Hospital
BMI Goring Hall Hospital
BMI Hampshire Clinic
BMI Harbour Hospital
BMI Highfield Hospital
BMI Huddersfield Hospital
BMI Lancaster Hospital
BMI Manor Hospital
BMI McIndoe Surgical Centre
BMI Meriden Hospital
BMI Mount Alvernia Hospital
BMI Oxford Clinic
BMI Paddocks Clinic
BMI Priory Hospital
BMI Princess Margaret Hospital
BMI Runnymede Hospital
BMI Sarum Road Hospital
BMI Sefton Hospital
BMI Shelburne Hospital
BMI Shirley Oaks Hospital
BMI Somerfield Hospital
BMI South Cheshire Private Hospital
BMI Syon Clinic
BMI Woodlands Hospital
Along with a few hundred other advisers, I attended the Intercontinental hotel on Park Lane yesterday to hear PruHealth announce some enhancements to its ‘Vitality’ concept. In brief, Vitality is a wellness engagement programme that offers rewards to the member while improving the insurer’s claims experience. That’s the theory, anyway.
PruHealth appeared to pull back from the Vitality concept when it withdrew its free gym offer in early 2010, but this refresh once again makes it central to the insurer’s proposition. So much so that CEO Neville Koopowitz made clear at the launch that PruHealth no longer sees itself simply as a private medical insurer, but also as a wellness company.
Whatever advisers think of PruHealth, the insurer cannot be ignored. Even when it had relatively little market share (before the acquisition of Standard Life Healthcare), it set the pace, innovating in a fairly staid market. With the number of PMI subscribers in decline, PruHealth wants to broaden the appeal of the product and provide its members with more than just an insurance policy.
From next year, PruHealth policyholders will have access to a huge number of benefits that include special mobile phone tariffs, discounted holidays and tailored health plans. However, Neville Koopowitz, speaking to Health Insurance Magazine, said, ‘if people just see it as some discounts added to PMI then, quite frankly, they just don’t get it’.
Whether Mr Koopowitz is able to grow the market with this approach remains to be seen. I cannot help but admire PruHealth for its spirit of innovation, but it must be an insurer first and foremost and consumers expect insurers to pay claims before sending them on cheap holidays. As an adviser, the suitability and robustness of the insurance product will always be my primary focus.
The wires are abuzz today with news that Simplyhealth has reached agreement to acquire Groupama Healthcare. This news will have come as a surprise to most in the industry, although the recent trend toward consolidation has resulted from market pressures that are all too evident.
In the last year or so, Standard Life Healthcare and PatientChoice have both been acquired (by PruHealth and Westfield Health respectively), AXA PPP has reached agreement to acquire Health-on-line, National Friendly has withdrawn from the PMI market and CIGNA has withdrawn from the SME PMI sector. The landscape of the PMI market has changed dramatically, then, in a little over 12 months.
Although a smaller player, Groupama Healthcare is/was a leading light in the PMI market, with a reputation for delivering excellent service and a key proponent of sharing claims data—a divisive issue. It remains to be seen what of the Groupama ethos will survive the integration, but Simplyhealth has a strong corporate identity and is unlikely to be content with just re-badging products.
Today’s news will have raised a few eyebrows amongst brokers, who will be anxious that there is no further provider consolidation. A diminished number of insurers does not bode well for competition, and whole-of-market brokers need a good spread of providers to prove their worth.
As an individual PMI specialist, today’s news will not directly affect Regency Health, because Groupama competed almost exclusively in the SME sector. I hope that Simplyhealth will be able to accommodate the many good people at Groupama Healthcare.
The consumer association, Which?, has issued its latest report into private medical insurance, which I was asked to review prior to publication. The report is, I think, balanced and informative, and does not make the mistake of trying to offer advice. Instead, it provides a broad overview of the market and should help consumers to make an informed decision.
There are two aspects of the report that are particularly noteworthy. First, the comparison table is, by necessity, littered with so many caveats and qualifications that it illustrates just how difficult it can be to make a reliable comparison of PMI policies. Second, Which? surveyed nearly 3,000 of its members that have PMI and have ranked the eight largest providers for overall customer satisfaction.
The comparison table, below, aptly demonstrates why price comparison sites are not the ideal distribution channel for PMI. Aside from the obvious point that a client’s medical circumstances can sometimes determine the most appropriate recommendation, apparently subtle differences in cover can make a significant difference to the value of a policy.
What is not generally understood by consumers is that the PMI quote engines used by the main comparison sites are operated by brokers, like us, selling the same products at the same prices and earning the same commissions. The only advantage, then, is the convenience of buying online, and whilst some people prefer to buy this way, most would benefit from a discussion with an adviser.
The customer satisfaction survey should be of as much interest to brokers as it is to consumers. To the best of my knowledge, this is the first such survey and the results are more or less as I would have expected, with just a few exceptions. Top spot went to a resurgent Exeter Family Friendly, with CS Healthcare and WPA rounding out the top three.
Brokers differ in the importance that they attach to insurers’ service standards. The primary focus will always be on price and the terms of the contract, but it is in the broker’s best interests to place clients with insurers that settle claims fairly and deal with administrative matters promptly—sometimes, the broker can only be as efficient as the client’s insurer.
Comparison table reproduced with kind permission of Which? Click to enlarge.
Cover Magazine recently reported that a small but respected medical insurer has ambitions for its franchisees to establish referral networks of IFAs. Without wishing to rain on that insurer’s parade, it strikes me as unlikely that many IFAs—who tend to value independence above all else—would be willing to refer their clients to a tied agent.
Few IFAs advise on private medical insurance, and those that do tend to dabble rather than specialise. It would therefore seem sensible for IFAs to partner with PMI brokers, in order to provide their clients with access to specialist advice on a product that will often form part of a financial review. PMI brokers are aware of this opportunity and are often keen to establish introducer relationships with IFAs.
The mistake that PMI brokers invariably make is viewing this as a straightforward business arrangement, where the IFA will be motivated to refer clients for financial reward. In my experience, IFAs are primarily motivated to add value for their clients, to be seen as a hub for all matters financial, and to ring-fence their core business in the process. The commission share, whilst gratefully received, is almost incidental.
This puts a different complexion on the IFA-PMI broker relationship and makes cultural compatibility more important than financial reward. Professional standards are far higher in the IFA sector, with the minimum qualification requirement due to be raised further as part of the Retail Distribution Review (RDR). By contrast, there is no qualification requirement for PMI brokers, and, as a result, most do without.
Leaving aside the issues with the RDR, it has arguably prompted the IFA community to re-define itself. A transparent charging structure puts IFAs above the fray and the old-fashioned approach of selling products—still so prevalent in the PMI broking sector—is increasingly frowned upon. IFAs will therefore be naturally cautious about referring if there is a danger that their clients will be sold to, rather than advised.
The biggest challenge to the relationship between IFAs and PMI brokers, however, is that many brokers are now selling life cover and other pure protection products, thus encroaching on traditional IFA territory. This is a legitimate growth strategy for health insurance intermediaries, but it undermines the notion that IFAs and PMI brokers are natural bedfellows. PMI brokers cannot have their cake and eat it.
A number of years ago, Exeter Family Friendly (then simply Exeter Friendly) introduced a range of PMI plans that had the unique selling point of age-on-entry pricing. The marketing slogan that Exeter used to promote the product was ‘the age you join is the age you stay’, which provided ongoing reassurance to policyholders that they were not subject to the age-related increases that affect most PMI policies.
The scheme is now closed to new members but existing members continue to enjoy this benefit and are very loyal toward their insurer as a result. Policyholders do still see annual increases for medical inflation and these can be reasonably substantial, but still less than is customary. The downside is that the policies are subject to stringent financial limits on cancer treatment and it is this, I assume, that sustains the age-on-entry pricing.
I mention this only to illustrate the problem that the PMI market has with annual increases and the difficulty of overcoming this problem. Medical inflation is rampant and this is the primary reason—aside from age—why PMI policies are subject to annual increases well in excess of general inflation. Consumers buying PMI need to be made aware of this fact so that their expectations are set accordingly.
When National Friendly (then National Deposit) introduced its ‘Healthcare Deposit Account’, the USP was that premiums were fixed for life (later changed to five years). Naturally, this had tremendous appeal to consumers, especially those who had experienced significant annual increases. This was not traditional PMI, though: the flip-side of the fixed premiums was that members had to contribute a percentage of their claims and were subject to overall financial limits.
Predictably, the fixed-price model (whether for life or for five years) has proved to be unsustainable, despite the aforementioned controls. Whatever the appeal of fixed premiums, it is self-evident that they will not be viable in a market with high inflation. For consumers, National Friendly withdrawing from the PMI market reinforces the old adage that, if something seems too good to be true, it probably is.
For the PMI broking community, the National Friendly debacle is a lesson learned. Those brokers who recommended the original product will have had the unenviable task of apprising their clients of the recently announced changes. It is impossible to make a future-proof recommendation when advising on a product that is usually an annually renewable contract, but, nonetheless, brokers should be critically engaged with the products that they are selling.