In 1987, Peter Dalby decided to set up an insurance company. He secured the backing of venture capitalists, employed 12 people, opened an office above a shop in Leatherhead, Surrey and at his wife’s suggestion called it Prime Health. A year later some 10,000 policies had been sold.
A mere decade on, Prime Health is the UK’s fourth largest health insurer. The company occupies prestige premises in Guildford and has a workforce of 500 staff.
Prime Health specialises in the individual PMI market, but is also growing in the small corporate sector and offers other products such as critical illness and income protection.
To have grown so quickly in such a short time with limited spending on advertising, has been an outstanding achievement. A leading reason why the company has won so much business is through product innovation and for this Dalby can take much of the credit.
He formulated all Prime Health’s products, and having spent a career in almost every field of insurance, few understand the subject of insurance better. Dalby knew he had to introduce a number of new features and Prime Health is one of the few PMI providers to give policyholders a no claims discount. Some other insurers have been scathing, comments Dalby wryly. “They think it is just a cheap gimmick and is making PMI like motor insurance.” However, he points out: “I think it is right to reward people who do not claim, it is fairer and has since proved our most popular feature when we have surveyed our customers.” A further innovative feature is world-wide travel insurance, including winter sports cover, which Prime Health underwrites itself.
Despite the add-on features it offers Prime Health has still faced controversy over its use of moratorium underwriting – which is based on its customers’ preferences.
Most of Prime Health’s customers buy cover with a moratorium. But in its report of last year the Office of Fair Trading claimed this was a misleading practice, and called for it to be banned.
Since then, Prime Health has fought hard to make the OFT change its mind and seems to have succeeded. A new report to be published this spring is expected to show the OFT has reversed its position.
Last year, Prime Health staff held numerous meetings with OFT staff including its director Geoffrey Horton. The message was reinforced that Prime Health’s customers did understand what the moratorium approach to underwriting meant and a MORI survey showed that 75% liked this method of purchasing PMI.
In addition, Prime Health offers its customers the choice of either moratorium or underwriting, and 98% choose the moratorium. Dalby says: “Underwriting at point of sale can be time consuming for the customer and there is also the problem of nondisclosure.”
Dalby was displeased that the OFT claimed the moratoria approach disadvantaged customers. He is a man who believes strongly in consumer rights and fair play in claims handling.
Central to this is membership of the Insurance Ombudsman. Prime Health has paid out over 100,000 claims, but has only had three claims upheld against it by the Ombudsman, and has belonged to it since its inception eight years ago. Leading health insurers BUPA and PPP are not members of the Ombudsman scheme.
Any complaints, he says, are most often linked to rising premiums, and the struggle to keep these down is a problem faced by all health insurers.
Like others, Prime Health has set up a network of hospitals to give it greater control over costs. But he emphasises this is not compulsory.
He adds that customers should have the choice of buying either with or without a moratorium. However, it is vital they understand what they are buying. This is why Prime Health produces all its sales literature in plain English.
Prime Health wins about 50% of its business from customers switching from their existing providers, with the remainder being new business. However, the PMI market has been stagnant for several years, and Dalby believes there will be no overnight improvement.
He comments that while in the UK the National Health Service is seen as a sacred cow, it is a different picture in Europe. “There, even in socialist countries it is acceptable that the better off will pay for their healthcare,” he says.
He adds that the removal by Labour of tax relief for the over 65s has hit the sector. “We have found that about 25% of our policyholders aged over 65 have either lapsed or downgraded their cover.”
The majority of Prime Health’s individual policies have been won through advertising and the direct sales force. In the early days, Dalby acted as copywriter himself. His advertisements which appeared in the quality daily press asked readers if their existing health insurer offered as many benefits as Prime Health. This style continues today, and apart from individual business, the company has won key affinity group business such as Saga, the association for the over 65s.
Now there is increasing emphasis on the intermediary channel. Some 15% of policies are currently sold through brokers, although this number is rising. This is partly due to Standard Life ownership and also the appointment of a dedicated broker sales manager, Philip Wright.
Prime Health is also increasing its share of the small corporate market and has some 12,000 policies with companies of up to 10 employees.
Last month, Dalby celebrated his 10 years at the helm of Prime Health. He has come a long way since starting his insurance career back in the 1960s. He has also worked for brokers Lowndes Lambert and later Crown Life where he first gained experience of the health market. But his knowledge covers the claims field, technical underwriting and sales, and it is this which allows him to take a hands-on approach with the company.
Dalby has a tremendous enthusiasm for the company and its products. But he also has an enviably relaxed manner. He says he rarely suffers from stress and indeed emanates calm. Fitness, he says, is one of the reasons for his sangfroid. He has a gym at his home in leafy Surrey where he lives with his wife and three dogs and a cat.
His home also has an outdoor pool which he swims in each weekend whatever the weather. As if this was not enough he also has an acre of garden which he tends himself.
That is not to say there have never been worrying times. Most notably these were when Prime Health was owned by the Municipal Mutual Group which later ran into financial difficulties, despite the fact that as its health subsidiary, Prime Health continued to perform well.
The solution materialised when Prime Health was bought by Standard Life, Europe’s largest mutually owned life insurer. Dalby says it is an ideal fit.
“They wanted their IFAs to have access to a health insurer and had been looking round the market,” he says. “What they were most interested in was our culture. They wanted to see our complaints record and once they had a feel for us the deal was done in three months.”
Since then, Dalby says Standard Life have allowed Prime Health total freedom in the way he and his team run the company. And judging by present form, this strategy looks set to continue.