A move into the cash plans market by Boots the Chemist could give the sector a welcome boost. Shoppers at Boots can now buy cash plan policies off the shelf from some 250 stores. And if the scheme takes off, the plans will be available at all 1,300 branches. The policies are underwritten by Royal & Sun Alliance which has set up a special unit to administrate them, based at its Bournemouth healthcare centre.
Boots has emphasised it has no plans to enter the private medical market at this stage. But at the same time, some health insurance experts are concerned that even relatively simple cash plans could cause confusion for customers. Many still feel any insurance product should not be bought without independent advice.
Meanwhile, as cash plans gain a higher profile, several health insurers are looking at their existing cash plans and, in many cases, adding enhancements to cover.
WPA, for example, has added a range of improvements including private GP fees of up to £40 a year and cash benefits towards chiropody and NHS prescription charges to its Health & Sickness Plan.
BUPA is about to buy Coventry based cash plan provider Mercia Health Benefits. This is seen as evidence of the provident association’s commitment to the sector, and it is also expected to revamp its present range of products following the purchase.
Many providers are already offering high levels of service. The Health Scheme of Hull for example, has linked up with the provider of a medical helpline and says it processes claims in almost all cases within 48 hours.
Cash plans are provided by companies regulated by the Department of Trade & Industry and operate on a “not for profit” basis and are limited by guarantee.
This type of financial arrangement can appeal to many clients who favour an ethical approach to health provision. Typically trade union members view cash plans as an important part of an employee welfare package.
Cash plan providers do not have shareholders expecting dividends and any surplus is either transferred to reserves to meet DTI regulations or ploughed back into the company. This income is then used to enhance existing benefits or introduce new ones.
Any surpluses from premiums are also frequently used to provide equipment for medically related charities and NHS Trusts. The British Healthcare Association, which is the trade body for providers, says over £2 million was donated last year to the NHS and selected charities by cash plan providers.
So with all these positive attributes, it seems there has never been a better time to buy a cash plan.
But like so many other forms of health insurance, it pays to take the advice of an expert. Val Harper Sherry runs an independent health insurance consultancy, H S Associates, based in Exeter, Devon, which has some 15 years experience in the cash plan industry.
The company is an expert in the cash plan market and is currently at work on a major research project, which it expects to be completed within the next few months. This will detail the exact ranges of benefits available from all the providers in the market.
With much research still to be done, H S Associates is unable to provide detailed comparisons until this summer. But there are certain providers which have been impressive.
These include The Health Scheme of Hull which is seen as one of the best value providers in the country, WPA for its high service levels, and Patients’ Aid for its efficient administration.
H S Associates advises on products and services such as critical illness, occupational health and PMI. Cash plans, however, are a key area. Harper-Sherry says it is vital to see cash plans as “a comprehensive health maintenance programme giving financial assistance in times of medical need, rather than direct access to medical facilities”.
But cash plans vary considerably in terms of the benefits they offer, and Harper-Sherry urges individuals and companies to seek advice from an expert before buying. And while she is a huge fan of the cash plan concept, she is not afraid to offer constructive criticism: “The cash plan industry in general is weak on sales and marketing and lacks direction and vision.”
Harper-Sherry also accuses many cash plan providers of being resistant to change. She believes the majority of them still take the attitude of telling potential clients either to accept what is on offer or forget it. Instead, she thinks they need to be more flexible in both their approach and benefits, and adopt a more progressive approach to marketing. She points out that many people do not even realise they are receiving poor value for money from their cash plan. She adds that even in this scenario, many subscribers remain loyal to their scheme unless they are advised to switch.
What is more, many people will buy a cash plan from a provider who is based in their local region. Unless they are advised to look elsewhere, they will continue to be unaware that a choice exists.
Harper-Sherry says that effective intermediaries should be able to provide their clients with a comparison of different schemes and review the cash plan contract they have sold annually.
It is up to the intermediary, she stresses, to appraise the work of cash plan providers in terms of benefits, service and administration, and inform their clients of the differences.
In her view it is clear that the current standards of advice are not adequate. She has discovered a number of cash plan subscribers were single people paying into family schemes and so buying cover they did not need.
Where intermediaries are selling cash plans, she emphasises, they need to be prepared to overcome customer objections.
H S Associates says some people will have refused to have joined a cash plan in the past because they did not understand the literature or felt it was too complicated. Others will be suspicious of the number of benefits on offer, feeling a cash plan is “too good to be true”.
Other potential clients delay joining a plan because they have not heard of the provider. Many will feel safe with a high profile company, such as HSA or WPA, but not with a smaller provider who may offer greater benefits.
Harper-Sherry also believes that cash plans can offer employers a far more affordable option than private medical insurance. Indeed, rising premiums mean PMI is often only an option for senior members of staff. But with costs from as little as 99p a week, it cannot be said that cost is a factor with cash plans.
The challenge now is for intermediaries to sell the benefits and convince employers that cash plans, while rooted in history, are the way of the future.
Although it seems as if this is already happening. The British Health Care Association says take up of products is on the increase – with figures doubling over the last six years to £177 million, and much of this through company rather than individual sales.