Cash plans have grown hugely in popularity among specialist healthcare intermediaries over recent years. But can general IFAs promote them to their clients too? What are the potential benefits – and risks? Tessa Norman reports
Cash plan providers looking to expand their distribution are increasingly targeting non-specialist advisers.
But as intermediaries question whether non-specialists have the expertise and the appetite to sell cash plans, is this the most effective way to grow the market?
Cash plan providers say while the vast majority of the intermediary business they do is through specialist health insurance advisers, as the product develops, they are beginning to look at advisers which specialise in other areas to help grow their distribution.
Westfield Health is running a series of adviser roadshows to help introduce general insurance brokers and financial advisers to cash plans. It says it is generally targeting those who already advise companies on areas other than healthcare, but also sees an opportunity among financial advisers with business owners as clients.
In addition, the provider has launched an intermediary toolkit which aims to support advisers new to cash plans with materials such as prospecting letters and email templates.
“Cash plans have evolved from simply offering cash back on every day health care to a broader package,” says Paul Shires, executive director – sales and marketing at Westfield. “With that in mind we wanted to broaden our distribution.”
Shires says that in the past corporate brokers and financial advisers may have been put off the health insurance market by the complex and expensive nature of private medical insurance.
He says: “We want to engage with advisers with a simple product which can be put in place for the whole workforce.”
Shires says health insurance specialists remain key to Westfield’s strategy, but that by “casting the net wider” and attracting new advisers to the market the provider can help spark greater interest in cash plans. “This will be of benefit to everyone, including specialist advisers,” he says.
Peter McAndrew, sales director at Health Shield, says the provider is seeing an increasing number of enquiries from non-specialist advisers.
“Health insurance advisers have been quite slow in realising the importance of cash plans,” he says.
“From our research we know that only about half of the advisers in the health care market actively sell cash plans and they are leaving quite a big hole for non-specialists to fill.”
Howard Hughes, head of employer marketing at cash plan provider Simplyhealth, adds: “We have a number of advisers who dabble in cash plans and the question is can we get them to do more? Cash plans are much simpler than PMI and have fewer pitfalls like medical underwriting so it makes more sense for non-specialists to sell cash plans than PMI.”
But while many advisers agree that providers’ desire to expand the market is welcome, others have raised concerns that new advisers will not have the specialist knowledge necessary to advise on cash plans.
Paul Brantingham, director at i2 Healthcare, says that although cash plans are relatively simple products, selling them requires additional knowledge such as an understanding of NHS and private medical treatment processes.
“Often a company will consider cash plans and PMI simultaneously, and non-specialists are unlikely to fully understand the relative benefits of the two products,” he explains.
“Will GI brokers and financial advisers be able to explain as well as a specialist adviser how cash plans can and should dovetail with other corporate health benefits? “
Iain Laws, managing director – UK healthcare at Jelf Employee Benefits, says widening the distribution of cash plans will hopefully improve understanding of the benefits of the product and expand their customer base, but warns there are risks involved.
“Insurers looking to expand their distribution into non-specialist advisers will need to ensure that any intermediary is competent to correctly sell their products to avoid customer dissatisfaction and the associated negative impact on insurers, intermediaries and the market,” he says.
Providers, however, say they are confident they can offer appropriate training for non-specialists and emphasise that cash plans are relatively simple.
And Shires says some may choose to work in partnership with a health insurance specialist, to which they can refer clients wishing to review PMI or more complex arrangements.
INTRODUCER OR ADVISER?
Some experts, meanwhile, argue that non-specialists are better suited to a non-advised, single-tie proposition than a fully-advised offering.
Sue Weir, chief executive of cash plan provider Medicash, says: “More people highlighting the benefits of cash plans can only be a good thing and we do work with some non-specialist brokers.
“I do not believe that you need to specialise in health insurance to sell cash plans because they are relatively simple, but where we would need to be clear is whether the sale is on an advised or a non-advised basis.
“If it is advised the seller needs to have a full appreciation of the whole range of the market and a more detailed understanding of the product.”
McAndrew agrees that non-specialists are more suited to an introducer role on behalf of a single provider, rather than a fully advised role.
Mike Blake, compliance director at specialist intermediary PMI Health Group, says this is an important distinction.
He says: “Firms will need to decide whether they are going to be single or multi-product advisers. Selling a single cash plan product is relatively simple but, if advising on a number of cash plans, there are subtle differences between providers that can catch out the unwary.”
But according to others, a better way to grow distribution would be to encourage more advisers to set up referral arrangements with specialists.
“I would love to see more advisers selling cash plans, but these should be specialist healthcare advisers,” says Tom McGuinness, sales director at specialist intermediary Premier Choice Health.
“Generally, when you are talking to a client about a cash plan you are also talking to them about other healthcare-related products, so how would a non-specialist adviser handle this?”
He argues that providers should help facilitate referral arrangements between specialists and non-specialists, so that each adviser “can concentrate on what they do best”.
Many financial advisers already have referral arrangements in place for specialist areas such as PMI and cash plans, and prefer to concentrate on just one or two areas.
Aj Somal, chartered financial planner at Aurora Financial Planning, says: “A lot of IFAs do have business owners as clients, but would be reluctant to get into corporate benefits as they already cover a number of different areas and there is an increasing trend towards specialisation.
“Personally, I do not see healthcare as a core part of my business so I would refer a client interested in cash plans to a specialist.”
Peter Chadborn, director at Essex-based IFA Plan Money, which specialises in protection and retirement planning, says he would view cash plans in the same category as PMI.
“As an IFA I would want my client to consider the most comprehensive solution, so as this is not an area we specialise in I would refer the client to a specialist healthcare firm,” he says.
Westfield’s Shires says he agrees that some advisers will choose to set up a referral arrangement rather than enter the cash plan market themselves.
He says: “We are trying to raise the profile of cash plans so if we can stimulate more referrals then that is welcome too.”
Another potential issue is whether the perceived low value of cash plans will put non-specialists off.
Paul Roberts, senior consultant at corporate healthcare intermediary IHC, says: “The main issue for IFAs to even consider looking at this product is the low earnings. The cash plan market is a small premium and a small commission market that is unlikely to plug the gap for those seeing earnings fall in other areas such as pensions.”
Hughes admits that the low premiums of cash plans presents a challenge, but says the best opportunities lie in putting the product in place for a whole workforce.
“When done on a large scale it becomes worthwhile from a commission point of view,” he says.
McAndrew believes that the perceived low value of the product is part of the reason why some health insurance specialists have chosen not to advise on cash plans, but argues this is likely to be less of a barrier for non-specialists.
“The premiums may be low, but we wrote £6.4m worth of new business last year, so that’s an awful lot of commission for the advisers selling it,” he says.
“To GI brokers it is an additional product and an extra revenue stream, whereas some health insurance brokers see it as an unnecessary addition if they already have a large PMI book.”
Providers point out it is very early days in terms of the number of non-specialists actively selling cash plans so far.
And PMI Health Group’s Blake says providers will have to make a judgment on whether the business generated is worth any continued investment.
“It is costly to open and maintain agencies and to provide the necessary training,” he says. “It will be most worthwhile if providers have identified employers not currently served by specialist healthcare firms, who they know non-specialists can give them access to.”
So while non-specialists could help open up a whole new market for cash plans, whether providers will be able to successfully navigate the potential pitfalls in doing so remains to be seen.