The consumer has been crowned king since the inception of the world-wide web. And this new royalty has numbers on its side. But has consumer empowerment dealt a blow to the health insurance industry by threatening to cut out the middle-man?
Healthcare and protection insurance products are traditionally sold face-to-face, over the telephone or through a bank or building society. They are also sometimes “given” as an employee perk.
But recently we have seen an increase in consumers making direct purchases while surfing the net. Swiss Re Life and Health’s Insurance Report 2000 found that nine per cent of people say they would be “fairly or very likely” to buy health insurance online. And as there are approximately 6.5m UK households with computers, the potential for this sales channel to grow is enormous.
Clive Waller is a partner in Clive Waller Consulting and an associate of the Society of Financial Advisers. He has firm views about the impact of e-commerce on the healthcare insurance market. He says: “The independent financial adviser (IFA) creates the interest and the sale but there is nothing stopping the consumer from looking into buying the product cheaper elsewhere. In terms of selling private medical insurance (PMI) the internet means IFAs could lose their business.”
Waller observes, however, that many insurance companies use the internet merely as an advertisement mechanism, hoping that people will react. He points to an acronym familiar to the marketing industry, AIDA: awareness, interest, desire and action. He says: “This is the process the mind follows when making a purchase. But insurance companies are not thinking internet, they’re thinking paper-based marketing. There is no pull.”
Market leaders such as PPP healthcare and Bupa use the net to inform potential customers of their products but they do not make it possible to buy the product directly online. Instead these sites advise the browser to ask an adviser for further guidance before parting with any money.
This is because health insurance is not, according to industry experts, a product to be bought online as simply as the weekly shop from Tesco Direct.
Waller says: “Healthcare insurance products are not pleasure purchases nor are they, to some people, necessity purchases. They are motivated by fear.”
The Association of Medical Insurance Intermediaries (AMII) has strong views on the issue of selling healthcare products on the net. AMII executive committee member Ronald Burnett vehemently advocates the need for personal involvement to explain to the consumer what the product does and does not cover.
He says: “It is virtually impossible for a consumer to make an informed decision when purchasing health insurance over the internet. If the industry allows the consumer to purchase in e-commerce format, without any point of contact, then it will be the cost that will inevitably determine whether they will take out that policy.”
Another organisation fighting on behalf of the consumer is the General Insurance Standards Council (GISC). Policy manager John Gorham says: “It is important that a website offers a telephone contact for a customer to obtain more detail on subjects such as complex pre-existing conditions or to discuss their requirements in more detail.”
The Office of Fair Trading is not against the sale of healthcare insurance products over the internet in principle. But spokeswoman Kathryn Hinchliffe says: “If the consumer doesn’t feel happy about disclosing personal information over the internet then perhaps using the telephone or postal service would be the better option for them.”
Help, however, is at hand. A number of companies, such as Moneynet.co.uk, have emerged as technological hand-holders in the consumer’s quest for online quotes. Other sites are run by household names whose brands encourage consumers to browse to see what products are available. But does the consumer know what to look for?
Moneynet, is a one-stop shop for all things concerning personal finance. Launched in partnership with private health care specialists HIFAC PMI, it houses a comprehensive guide with information on examples of cover and explains what to expect with superior, standard and basic cover. The question and answer section details the elements to watch for and there is also a useful glossary of terms. The browser can also click on the option of contacting the advisory team if, after filling out a form that tailors the quote to their needs, anything is not entirely clear to them.
When the application is submitted, the client’s chosen insurer will send out the necessary paperwork and brochures, and, when these are completed and returned along with the direct debit forms, cover will take effect.
Online insurance company Best Quote (http://www.life-insurance-bestquote.co.uk/life.htm) has a comprehensible website with a frequently asked questions section, a glossary of insurance terms and information on mortgage protection. However, its information is specific to its own products. Partner Nigel Hindle says: “We offer information about critical illness (CI) cover but don’t offer advice as this is an execution-only service. The client then chooses the appropriate amount of cover to suit their budget and needs.
“It has been fantastically successful. About 25 per cent of our business has been through the internet.”
Best Quote believes its customers are “informed individuals” able to fit the product to their needs. Hindle says: “We have a unique product that encourages people to buy CI by making it affordable because the cost is the biggest barrier for the majority.
Direct Life and Pensions is another online company which does not offer generic advice. According to spokesman Gregory Taylor, people who are interested in buying know what they want. Instead of advising, the site aims to “steer” the customer through the basics of the product.
Health insurance can also be bought online from Western Provident Association which has a site specifically for its low cost PMI policy – XS Health.co.uk. The user-friendly site is different from Direct Life and Best Quote in that it offers advice about how to use the site and informs the potential customer that if they are unsure about anything staff are on hand by email or phone to clarify details.
According to WPA communications director David Ashdown, although 50 per cent of people who have joined are new to health insurance, surprisingly, hardly anyone contacted WPA for further advice.
He says: “I have spoken to a number of subscribers who have found using the internet easy. They can browse at their leisure and go through the information.
“Our subscribers can log onto wpa.org.uk to make a claim and track its progress. In the future it will help keep administration costs down because we won’t have to produce expensive literature. I see it as a pointer for the way PMI will be sold in the future.”
However, despite the success of Best Quote, Direct Life & Pensions and WPA, many insurance companies believe that searching for the most cost-effective option is not advisable when a client is taking individual responsibility for the purchase.
PPP healthcare’s commercial director, Fergus Craig, is on the PMI Panel, a sub committee of the Association of British Insurers which deals with regulatory issues. He believes that while motor insurance is easy enough to buy online, medical insurance is more complicated. “I would be concerned if I thought people were not confident and familiar with the product and had no other form of contact as a means of buying. It is very important that a sale is backed up by the ability to clarify the points of the cover with a contact phone number,” he says.
He is backed by the views of the Financial Services Authority. Regulating healthcare products is not in its remit, but, where the information is purely factual and the advice offered is simply generic, spokeswoman Louise Buckly says: “We do not take it for granted that the consumer is all-knowing. We would advise people to do some research and ask lots of questions. If there are any doubts go and seek advice.”
Whatever your view on the correct way to sell health insurance on the internet, the technology is allowing many consumers to discover and research healthcare products.
However, as Swiss Re Life and Health’s Insurance Report 2000 suggests, consumers go to recommended sites or rely on guesswork, using search engines to find relevant addresses. This means there is still a need for organisations such as the AMII and GISC to work to ensure that insurance companies, which use the web to raise awareness of their products, provide customers with contacts for further advice. This will protect the consumer, while sustaining the role of the intermediary.