After living for five or six years in the Arabian desert, the phoenix burnt itself on a funeral pyre and rose from the ashes with renewed youth to live through another cycle.
Many intermediaries are hoping the individual private medical insurance (PMI) market can be reborn as dramatically as the mythical bird, as sales of the product are drying up in a buyers’ desert.
Individual PMI claims have risen seven per cent a year over the last five years, according to Datamonitor, pushing premiums sky-high and pricing many people out of the market.
James Allingham, a senior researcher at Datamonitor, says this rise can be attributed to the advancement of medical science.
The increase in availability of new and expensive treatments has given more opportunity for consumers to claim on their PMI.
According to Norwich Union Healthcare commercial director Tim Baker, PMI has become too expensive for a large proportion of the British population.
“Many individuals aspire to afford private healthcare, particularly people in their 30s or 40s with families. But when they look at PMI relative to other needs such as pensions, the price is simply prohibitive,” he says.
This rise in the cost of individual PMI may be only one contributing factor in falling sales but it has led some to say it is practically impossible to revive the market.
“There is no quick fix and although there has been innovation, it is just cutting the same cake a different way,” says Dale Tranter, a senior researcher at Misys IFA.
But before the last nail is banged into the individual PMI coffin, what else has gone wrong and what can be done to turn the market around?
The one area in which PMI sales have grown has been the group market, specifically the small business market.
But while more and more companies are seeing the benefits of offering group schemes, this has had a knock-on effect on the individual market as customers transfer from an individual to a group plan.
“Companies are starting to extend their PMI schemes to the next level of management. These people are often those who could afford to have an individual scheme,” says Joanna Caparn, the head of personal sales at Bupa.
According to Allingham, market saturation is another reason for the drop in sales.
“Ideally, health insurers need to persuade more consumers to take out PMI as a precaution or a ‘just-in-case’ policy. Consumers who view PMI in this light are likely to be younger and healthier than traditional policyholders,” he says.
Insurers have realised they need to be more innovative if they are to increase sales of individual PMI and attract these uninsured, younger people.
Recently they have been doing their best to produce a product aimed at kickstarting a new period of growth through a number of different approaches, all of them based on offering a more economical PMI product.
Some insurers have tried to attract new subscribers with high-excess plans giving savings of up to 80 per cent on regular PMI.
“High-excess policies bring the prices tumbling down to a fifth of what customers would pay for fully comprehensive PMI and this will bring a different way of thinking,” says David Ashdown, the communications director at WPA.
Some intermediaries have not been wholly convinced these new ideas will achieve a rejuvenation of the market.
Bill Poynton, an intermediary at Health Care Plus in Abingdon, says he does not generally recommend high-excess policies to his clients.
“We are getting enquiries about high-excess products but when we explain the costs to people they are put off. We actually try to dissuade people from taking a high-excess policy and advise them to save up and pay for treatment themselves,” he says.
Penny O’Nions, the principal of Onion Group, advises clients to save money for self-pay in a specific fund.
“We start people on a fully comprehensive product but ensure they also put some money aside. As the fund builds up, you reduce the level of insurance to compensate for the elements the contract will not pay for,” she says.
One more reason for the lack of individual PMI sales is that specialist health intermediaries and independent financial advisers (IFAs) concentrate more on the group market than on individual PMI.
Michael Payne, the proprietor of intermediary Healthplan in Colchester, says: “Intermediaries should be promoting individual PMI to their customers. If they put as much effort into it as they do in the group market then we could see some growth.”
Bupa is one insurer trying to encourage more general IFAs to sell PMI.
Caparn says: “A lot of potential to grow the PMI market has not been realised.
“IFAs who are advising on pensions and life insurance could add PMI to their product portfolio.”
But although there is a massive untapped IFA market for individual PMI products, many IFAs find the products have become too complex to cope with.
“Insurers need to try and make their plans less complicated. IFAs who do not deal with PMI on a day to day basis find it difficult because there are so many different kinds of cover,” says Payne.
Jon Green, the healthcare underwriting manager at GE Frankona Re, believes one way of attracting more customers to PMI is to link different types of health insurance.
GE Frankona Re has developed a hybrid plan that integrates PMI with critical illness or income protection.
Innovation may have some effect on the market, but most people within the industry agree a main problem is that the private sector replicates the provision provided by the National Health Service (NHS).
Norwich Union Healthcare recently put forward a plan to integrate the NHS and the private sector.
Baker says: “The one thing that will produce a big change is what happens in the public/private interface.”
PPP healthcare distribution development manager Nye Jones says: “If we see the same things happening in the UK as in Australia, where there are tax incentives for people to opt out of the state system, then the market could grow.”
The government has gone some way towards integrating the two sectors but the jury is still out on what the next step will be and whether it is still possible to grow the individual PMI industry.