It is no secret that the individual PMI market has struggled in recent years. Harvey Jones looks for cause for optimism
The resilience and optimism displayed by the individual private medical insurance (PMI) industry is a wonder to behold.
Brokers and insurers have been tested to the limit by two lost decades of dwindling sales since New Labour scrapped tax relief on premiums. The industry desperately needs an injection of fresh blood, in the shape of younger, healthier clients, but attracting them isn’t easing.
Bupa is the latest to woo this elusive market with its Fundamental Health Insurance plan, launched in July, which it describes as “entry-level health insurance to meet demand for more affordable healthcare”.
It follows Bupa research that shows 37% of Generation X (32-55 year olds) would buy PMI if the premiums were affordable.
The plan, sold through intermediaries, allows customers to switch from a personal scheme with their existing underwriting and exclusions. Terms are also available for employees leaving competitor group corporate schemes.
Fundamental provides full cancer cover, in and day patient treatment, and outpatient benefits, plus £350 physical therapy to support recovery after treatment.
Alex Perry, general manager, Bupa UK Customer, says cost is the main barrier to growing individual PMI sales.
“The reality is that more people won’t take up health insurance unless it is more affordable, he says, adding that changing this will be a joint effort. Only when insurers, hospitals, doctors and other healthcare professionals work together to improve quality and affordability will we truly have a blueprint for growth.”
Cost versus choice
AXA PPP healthcare intermediary distribution director Paul Moulton says “cost and choice” are of equal the audience when driving sales.
He says AXA’s modular plan Personal Health addresses both by allowing clients to select the benefits they want most and forgo those that aren’t a priority.
“They can also opt for other ways to manage cost such as an excess, a no-claims discount or a six-week plan,” he explains.
Moulton says added services can also engage members and reach out to a broader audience.
“AXA offers extra care and support such as 24/7 telephone access to its dedicated team of health professionals including nurses, midwives, pharmacists and counsellors, and online health information and guidance.”
The AXA PPP Health Tech & You Awards aims to build interest by showcasing how health technology can help people lead healthier lives, Moulton says.
The results are positive.
“We are seeing healthy numbers of new members joining – and staying with – AXA PPP healthcare, growing our member portfolio,” he says.
WPA’s most recent attempt to crack the individual PMI conundrum is its Multi-Family Healthcare plan, which allows family groups to save thousands and benefit from group premiums.
Corporate communications director Charlie MacEwan says this attracts younger customers by letting grandparents pay their premiums.
“It also drives adviser sales as existing customers introduce them to different branches of the family,” he argues.
MacEwan says WPA’s Shared Responsibility co-insurance plans are an effective way to reduce premiums without sacrificing cover.
“This is even more important given the imminent impact of the insurance premium tax [IPT] rise,” he says.
He says WPA aims to drive sales by giving customers what they want: great value medical insurance with excellent customer service. MacEwan says this includes freedom of choice and consultant.
“This should be a clinical decision agreed with the patient and their doctor, not a commercial one determined by the insurer,” MacEwan says.
Isaac Lam, business development director at APRIL UK, another provider, says the industry has to be honest with itself.
“There’s no escaping the fact that the individual PMI market has struggled to find growth in recent years,” he says.
PMI should be thriving on growing fears over NHS funding, but other factors have worked against it.
“We are coming off a recession, and premium inflation has easily outstripped wage inflation since 2008, pricing people out,” Lam says.
Last year APRIL UK launched its ‘inSpire’ Private Medical Insurance Plan last year in a bid to make cover more affordable and reverse the sales decline.
Created in partnership with Spire Healthcare, the plan provides policyholders with access to any of Spire’s 38 hospitals in the UK.
Lam says: “The collaborative approach has helped us control our claims costs and deliver an extremely competitively-priced plan. We are on course to hit record sales as a result.”
This approach requires constant liaison with hospitals and consultants, to drive lower premiums without alienating any party.
“If this can be maintained, there is no reason why the market cannot once again see growth,” Lam says.
He adds: “PMI growth doesn’t just lie with the insurer, but the whole private healthcare chain from insurer to hospital operator to consultants. We are optimistic that the collaborative concept can be developed further, helping us to reach more people.”
Lawrence Christensen, group marketing director at Benenden, suggests there is only so much traditional insurers can do to cut PMI premiums, which average around £900 a year.
Benenden’s Discretionary Personal Healthcare product charges a fraction of that sum, £8.45 a month, around £100 a year, by working to a different model
Christensen says: “All members pay into a mutual fund and can request access to a range of health services when they need to. There are no upper age restrictions, medical exclusions, quotes or excesses to pay.”
Members pay into a communal fund which helps them when they need it and others when they don’t.
“It is aimed at relieving the distress of long NHS waiting lists and helping members achieve prompt diagnosis and treatment,” he says.
Christensen suggests that the future for traditional PMI is bleak.
“The individual PMI market has decreased almost 30% since 1998 as one in three subscribers leave, and it looks set to continue its decline,” he says.
This decline is hitting specialist healthcare intermediaries as hard as insurers, and they are grateful for insurance company attempts to turn things round.
Richard Holden, commercial director at Chase Templeton, the national intermediary, says Bupa Fundamental is an excellent product aimed at the lower end of the market. He sees this as an attempt to grab market share from competitors but questions whether the policy is too expensive to achieve that aim.
“I am hopeful that Bupa will get its pricing right as this will help to boost the wider PMI market,” he says.
Holden says other insurers are also working hard to attract new business with a range of incentives and rate cuts.
“Vitality has cut rates and recently introduced a summer switch, which made brokers start to think about it again. WPA is also offering a good switch policy at moratorium rates with ‘partner goes free’ as an incentive.”
Holden says that Aviva has also cut rates while The Exeter is offering two months’ free cover across its plans. The Exeter’s Health Essentials plan is targeting younger customers with less cover for more affordable premiums, similar to Bupa Fundamental.
Holden says insurers have started to offer faster GP consultations. In March, The Exeter launched a “virtual GP” service giving face-to-face consultations with private GPs online using a webcam.
The Vitality GP app works in a similar way while other insurers offer similar services too.
“Insurers are realising that seeing a GP quicker is a vital part of the PMI process,” he says.
Positive outlook
Holden remains positive about the outlook for PMI.
“All the providers are constantly introducing new options and incentives,” he says. “Feedback from clients who have claimed on their policies is positive the problem is that premiums are on the up and up.”
Despite its challenges, the individual PMI market is more competitive than it has been for years and clients are benefiting from greater choice, Holden says.
Martin Mathews at specialist intermediary Ultimate Health welcomes Bupa Fundamental for bucking the trend of provider consolidation and shrinking product choice.
He says the new product is similar to the core cover option of AXA PPP Personal Health Select.
“AXA PPP’s product module has proved popular and cost-effective, generating positive feedback from clients,” Matthew says.
It has also proved very popular in the ‘consumer switch’ and ‘switch group leaver’ markets, areas Bupa has largely shunned.
Mathews welcomes Bupa’s decision to venture into these markets.
“One of the most common questions clients ask when switching is ‘what about a Bupa quote?’ They find it puzzling that Bupa doesn’t quote on this basis.”
He believes this is a great opportunity for Bupa to offer cost-effective cover under its “market leader brand”.
“Whether it can boost the flagging individual PMI market in the long term will depend on whether it can keep premiums stable over the coming years. If they follow a competitive launch with the ‘PMI norm’ 10%-plus annual premium hikes any boost will be shortlived.”
Mathews also praises Vitality for its efforts to attract younger customers.
“People in their 20s or early 30s wouldn’t contemplate buying PMI when they have to pay the rent, house deposit, mobile phone bill, gym fee and so,” he says. “But with Vitality you can all but cover the cost of your monthly premium with the discounts on gym fees, cinema tickets, or by being a non-smoker.
“That makes it a very different proposition and we have many young clients with Vitality who would not be in the PMI market without it.”
Mathews says if Bupa can keep costs down on its Fundamental plan and Vitality continue to drive its philosophy forward, there are good reasons to be optimistic.
Claire Ginnelly, managing director of intermediary Premier Choice Group, says no single insurer has cracked the industry’s key aim of attracting more younger people into the market.
“Many insurers offer one or two months’ free premiums but this is only a short-term fix as next year the full premium must be paid,” she says.
No-claims discounts can attract younger, fitter clients, and she also singles out Vitality for praise, especially since it gives clients the opportunity to protect their no-claims discount.
Ginnelly says the individual PMI market is struggling and the industry needs to pull together to change this.
“There is no point in insurers innovating if intermediaries don’t support them,” he says. “The days of full choice and full cover at reasonable prices may be over but there are still lots of good products for both younger and older clients, as long as intermediaries fully review the market and explain to clients what their options are.”
There is no quick fix for individual PMI. Insurers and brokers will need to dig even deeper into their reserves of resilience and optimism. Fortunately, these reserves appear to be boundless.