With private medical insurance still not flying off the shelves, could a new ‘medical recovery insurance’ proposition help to shake things up? Stephanie Spicer reports
Healthcare intermediaries are always hopeful of product innovation in their chosen market and insurers strive to produce something new to differentiate themselves from the pack. Too often, according to Dominic Higham, managing director of MediCheque, such so-called innovations are merely variations on a theme: except of course for the medical recovery insurance plan which he has brought to the market.
What he accepts is that for all of the clamour for innovation when a new idea does hit the market it invariably takes a while to take hold and it helps to adopt a long-term view – as he has.
Medical recovery insurance seeks neither to compete or replace IP, cash plans or private medical insurance but to sit alongside whatever other form of insurance an individual wants to take out or employer to offer – and to offer something very different from those other insurances.
MediCheque offers two versions: MyRecoveryCheque modelled as a low cost alternative to income protection (IP) and aimed at the general market and the self-employed; and MedicalRecoveryInsurance for the employee benefits marketplace and more about providing benefits to employees for out of pocket expenses following an operation, rather than income replacement.
The latter is only being marketed through intermediaries and distribution deals are already in place with Team Rewards, Xexec and Xafinity. Intermediaires and employers can also white-label the site under their own brand.
Under MyRecoveryCheque benefits range from £150-£500 depending on the level chosen if only a few days recovery from an operation is needed. For operations which require a few weeks recovery payout ranges from £500-£1,500. Those needing one to two months recovery payout is from £2-£6,000 and for prolonged recovery the payout is from £5-£20,000. Premiums range from £3.17 pm to £10.22 pm (level 1 to level 4) up to age 17 and then in tranches up to £18.23-£60.32 for age 61-65.
Under MedicalRecoveryInsurance for the employer market, benefits options are either Silver or Gold and payouts range from £1-200 (depending on whether the policy holder has Silver or Gold cover) for simple operations to £5-10,000 for those requiring recovery periods of longer than two months. Premiums range from £5.50 to £10.00 pm (Silver or Gold) for age 18-35 up to £21-£38 pm for age 61-75.
Higham explains the premium and payout differences: “MyRecoveryCheque offers more options and higher levels of cover because it is mainly pitched to businesses or the self-employed as an IP alternative and is therefore a more considered purchase.
“With MedicalRecoveryInsurance, since it is aimed at out of pocket expenses and targeted at employees we had to obey certain rules: achieve certain price points; offer the best benefits that we could within those prices, and only offer two options because our research showed that these types of purchasers don’t want too much choice. Also for what is pitched as an out of pocket expense cover (rather than an income replacement) there is less need for higher limits.”
The benefits from medical recovery insurance can fund myriad needs: to fund additional physiotherapy and treatments not covered by private or state-funded medical insurance, pay travel costs to hospital, for holidays to help with recuperation, for child care or pet care needs, etc.
For employers Higham says issues of generous sick pay schemes, which can encourage prolonged absence or presenteeism, where employees return to work whilst not fully fit, can be aided by having medical recovery insurance as an affordable sick-pay scheme with defined recovery periods or amounts.
Part of the market getting used to the new proposition is adjusting to the claim criteria it seems – and concern that it misses many instances when payout would be made under IP.
Tom Conner director at Drewberry Insurance says: “This policy has more similarities to a critical illness plan crossed with a personal accident plan than to a health cash plan, and at Drewberry we don’t particularly like the restrictive nature of these plans where you have to have met a very specific criteria to make a valid claim.
“Alternatively we favour IP where the payout is related to the financial loss of having to take off work and can payout for any medical condition that prevents someone from working in their usual job. Most time off work is for back related conditions and mental health, which wouldn’t generally be covered under a critical illness plan or this medical recovery policy. IP can also payout long-term where the amount paid out relates to the policyholders post incapacity earnings, rather than an arbitrary (pre-determined) lump sum.”
Higham understands the argument but says: “The flexibility of our plans is such that they can be bought alongside insurance plans which are more suited to any long-term disability and which would require individual assessment and be more expensive and subjective. Our plans are there to help people cope when they can’t work for the first six months”
And Conner does add: “Despite Unum offering a range of plans to cater to different types of workers / companies, group IP can be expensive, especially for manual workers and therefore group personal accident insurance or this medical recovery plan may be the only affordable option for certain firms, particularly those in the construction industry.”
Mike Normansell, PR and content manager at ActiveQuote also has concerns about the claim criteria.
“These policies are designed to cover specific operations and medical procedures, and therefore fulfilment of the claim can rely on the claimant meeting very specific claims criteria, which, when it comes to medical diagnoses can become complex,” he says.
According to Normansell, accident, sickness and unemployment (ASU) policies offered by ActiveQuote, also designed to pay a monthly benefit due to ill health, are linked to GP sign-off which he says is a far more simplistic claim qualification criterion.
The more mass market appeal is perhaps where medical recovery insurance will find its niche – and this will in turn appeal to employers offering benefits to all staff.
“The best employee benefit packages usually include a core of PMI, death in service and IP,” says Conner. “Some firms may also offer dental and travel. These packages are more common for services based companies or the executives / office based workers of firms in other industries. Products such as cash plans or personal accident insurance are more common for lower pay grade employees or those in manual occupations.”
As to whether MediCheque has set a trend with medical recovery insurance Normansell says: “A period of ‘test and learn’ is most likely, with the key providers keeping a watching brief as to how successful these policies prove to be in the marketplace and against the more versatile IP policies.”
There is certainly an exercise in balancing the needs of the individual and/or employer and their budget and calculating what products can sit with others – cover and cost wise – which of course will appeal to intermediaries offering value across the whole protection piece.
Philip Blackburn, consultant at LaingBuisson, sees varying places in the market for medical recovery insurance.
He says; “It is an interesting concept and certainly has appeal as a stand alone product for the self-employed and small businesses, particularly blue-collar.
“But it could also fit well alongside private medical insurance, where customers have their diagnostics and treatment covered but also have financial security while recovering. Certainly medical recovery insurance has a place in the protection suite for sole traders and SMEs alongside established cover such as health cash plans, medical insurance, IP, personal accident, and critical illness. Their challenge is to establish a market foothold which is not being filled adequately by existing products.”
To this end apart from its own UK plans, Higham says his principal business approach is white-labelling MediCheque products to insurers and managing general agencies.
“Because the products are not health insurance they can be tailored for most markets and not restricted to the UK,” he says. Currently general insurance underwriter Capital Cover in Ireland is selling an accident only version of the products and a partnership in Norway with insurance agency Tide Forsikring is starting to “gain traction” and there is a partnership with US employee benefits provider CieloStar. Higham says he is also in discussion with other household names and has enquiries from companies in Israel, Brazil and Japan.
Not resting on its laurels, MediCheque has also developed accident only versions of its products, either 24 hour accident or for specific activities such as motoring or sports. As intermediaries seek to meet the challenges of advising across the board of clients’ needs and budgets, products to fill the gaps in the market in terms of requirements and affordability could increasingly add value to the product range at their disposal.