WAYS TO REDUCE THE COST OF PMI
■ Increase the excess
■ Opt for shared responsibility, e.g. from WPA or Exeter Friendly Society
■ Take a no claims discount
■ Take a six week wait option
■ Exclude certain treatment (e.g. cancer cover) or reduce the level of outpatient cover
■ Look for a budget PMI plan or a cash plan
■ Restrict the choice of hospitals
During tough economic times people tend to place saving money at the top of their list of priorities. Holidays, eating out and shopping become luxuries people cannot afford and long-term savings may suffer.
In some ways individual private medical insurance (PMI) is no exception. A lot of people who are strapped for cash will be looking at their renewal and asking whether cheaper alternatives are available or whether they can justify the cost of private healthcare at all.
Stuart Scullion, sales and marketing director at health insurance consultancy The Private Health Partnership, says: “In 2009 price became an even more important consideration than ever before. Clients want to see they are getting value for money in their policy. Many have taken the decision to apply excesses and downgrade benefits in order to reduce costs.”
Sarah Wilkes, director of Essex-based intermediary HealthCare Partners, says clients are more frequently trying to cut their outgoings due to the current financial situation.
“We are providing many more quotes for budget schemes in order to retain cover for those people who can’t afford to carry on with their current level of benefits but who wish to keep their insurance for times when they really need the cover,” she says.
Unlike other forms of insurance, however, PMI customers are not purely focused on price alone. The service and quality of cover that insurers provide are seen as equally important factors when choosing between policies. Kevin Murdoch, senior proposition development manager at PMI provider Aviva, suggests this is because health insurance is a lot more emotive than, say, car and home insurance.
“The individual wants to know their claim will be paid, they will be in a clean hospital and they will be able to speak to someone who is sympathetic,” he says.
Indeed, research by Bupa found that despite today’s economic climate, customers put health insurance at the top of the list of things most difficult to cut back on to save money – more so than holidays (20%), eating out (10%), and pensions and other long-term savings (19%). Two-thirds said having health insurance is very important or vital.
Fiona Harris, head of strategy and development at Bupa Health & Wellbeing UK, says: “People don’t think about their health in the same way as they do their cars or house. Opting for a health insurance policy just because it is cheap is risky. They know that having sufficient cover is critical – for example, knowing that Bupa’s cancer cover includes the latest drugs and treatments that even the NHS does not cover.”
As a result, insurers have not seen a big increase in consumers opting for cheaper policies. Murdoch says the premiums coming into Aviva have not changed dramatically and that while some people choose to remove outpatient cover or opt for six week wait policies, most still want full cover.
“Some are opting to reduce cover slightly but not significantly. The majority want to maintain the level of cover they have. The PMI sector is slightly more recession-proof because it is an emotive subject. The government is looking at how to continue funding the NHS and there are growing concerns about how long the impetus into the NHS can be maintained. PMI is still a very strong and valid alternative,” says Murdoch.
Bupa’s Harris says some customers choose an excess to reduce monthly premiums or opt to be covered in a smaller network of private hospitals. Disease-specific health insurance, such as Bupa’s Heart and Cancer policy, which can be as much as half the price of comprehensive cover, has proved attractive to some customers wanting speedy diagnosis and immediate cover for serious conditions.
“However, the majority of our customers still choose fully comprehensive health insurance because it covers all eventualities and provides unparalleled amenity, speed of access and personalised care. This complete peace of mind is something that we know our customers rank highly,” says Harris.
VALUE FOR MONEY
What is perhaps most important for clients is having a PMI policy which represents good value for money. Ian Sawyer, managing director of introducer facility PMI Partners, says this is not usually the cheapest.
“What people really want is to ensure that they are not paying significantly over the odds by staying year after year with the same insurer if another insurer can do the same for significantly less,” he explains.
When deciding which policy gives the best value, quality of cover becomes a key consideration. Health insurance intermediaries will always make clients aware of the quality of cover provided as part of establishing the client’s demands and needs. This will often include describing the level of service provided to clients by individual insurers in the recent past.
“We would be extremely reluctant to recommend an insurer that gives bad service because we believe that when you are ill you want good service and to speak to somebody competent as this is a very stressful time without the added complications of dealing with a difficult insurer,” says Wilkes. “We cannot recommend an insurer that gives bad service to our clients because any poor service also reflects on us and we pride ourselves on our care and attention to every person we look after.”
Elements of service that intermediaries will pay particular attention to include invoicing, accuracy in relation to the membership aspects of the policy, a fair and consistent approach to the application of plan benefits, policy terms and conditions, and payment of claims, renewals arriving with sufficient time and information, and presenting literature in plain English. PHP’s Scullion says service levels in the PMI market are generally good across the broadest range of providers.
“In my experience there tend to be two areas under which the service goes awry: where the provider takes on too great a volume of business, normally in a short period of time, and they do not have the administrative infrastructure to support those business volumes; and during and immediately after the installation of a new IT system or business engineering project,” he says.
Wilkes believes that service levels for individual PMI lack the attention that group PMI receives. Individual PMI is dealt with by a general team rather than having a dedicated person to who queries can be directed.
“Administration by insurers seems to be very automated where individual policies are concerned and this means that there is a distinct lack of personal service provided which is important when dealing with this kind of insurance,” adds Wilkes.
Some consumers will turn down an insurer if they have experienced poor service from them, regardless of how cheap the policy is, but in the majority of cases clients are not aware of the provider’s reputation for service until the intermediary brings it to their attention.
Penny O’Nions, principal of healthcare intermediary The Onion Group, says: “Clients will come to us asking to move from a provider because of bad service. They will also decline a provider if they or their friends or family have previously had a bad experience – ‘they wouldn’t pay out on my car accident claim’, or ‘they wouldn’t pay my friend’s hospital charges’ – but on the whole, the public have no experience and seldom give any thought to service standards, claims processes or related matters.”
Advances in technology and the availability of claims data could make consumers more interested in service standards in the future.
Charlie MacEwan, corporate communications director at insurer WPA, says: “Technology will give consumers access to objective information to help them make decisions, such as complaints data from the Financial Ombudsman Service. The bad insurers will be outed.”
Some people may be swayed by other factors when selecting a policy, such as prompt treatment, proximity to the hospital on the provider’s list, cancer cover, and the provider’s size, financial strength and length of establishment in the market. For others, brand will always be the most important concern regardless of the premiums charged.
“We have some clients who have been insured with Bupa for years and years and even though Bupa charge higher premiums than most insurers and have one of the highest increase rates over the year some clients would not dream of moving away from Bupa simply because of the name and the service that they receive,” says Wilkes.
So while price will always be a key element when choosing a health insurance provider, it is by no means the only one. The majority of people will opt for an insurer who can deliver on service and quality of cover yet still offer a competitive premium.