The trade association for specialist brokers is at a crossroads, according to its new chairman. He tells Health Insurance editor David Sawers where he thinks it should head
‘Closed shop’. ‘Talking shop’. ‘Commission club’. ‘Small fry’. The Association of Medical Insurance Intermediaries (AMII) has fielded its fair share of knocks through the years.
However, aside from the Health Insurance Focus Group at the British Insurance Brokers Association (BIBA), AMII has been the sole voice – aside from this magazine of course – championing the cause of specialist private medical insurance (PMI)intermediaries over recent times.
But, says its new chairman, the trade association which was founded in 1998 has “lost its way”. He’s going even further than that. It needs, in his opinion, to become a different entity entirely.
Wayne Pontin – who assumed the role of chairman this year and is currently sales development director of national intermediary powerhouse Jelf Employee Benefits – thinks that AMII needs to become “truly representative” of all sectors of the health insurance industry which, he points out, encompasses not only PMI but, dental, cash plans, group risk and other related benefits. It also means the association needs to open its doors to tied advisers, direct salesforces and insurers themselves.
BIG CHANGES AHEAD?
It’s a bold move, I suggest as I meet him the day prior to the 2012 AMII Annual Private Healthcare Conference, and one that is sure to prove controversial. After all, a trade association formed to represent the interest of brokers…inviting insurers to join?
Pontin is pragmatic. Like any trade organisation, AMII needs funds to be able to make its – or rather its members’ – voice heard. And that means broadening the membership base.
“I have actually put to the members that we’ve got to have a total cross-section of membership,” he says. “To be self-sufficient we need to consider the providers – and that’s not just PMI providers, that could encompass all the cash plan providers, it could encompass some of the group risk providers.”
So how did AMII find itself in this situation? Pontin says that while previous AMII chairmen have all made positive contributions in their own way, the industry’s goalposts have, to some extent, changed.
He’s got a point. There’s no escaping the fact that the UK’s PMI industry is not in as rude health as it once was. Just days after I interview Pontin, Health Insurance revealed exclusively that Bupa is to stop selling PMI through intermediaries.
Laing & Buisson and Datamonitor stats don’t make for happy reading. PMI subscriber numbers – both individual and corporate – have been heading south for some time. Providers – Groupama for example – have pulled out of the market while others – National Friendly springs to mind – have struggled. It’s time, Pontin says, for every stakeholder in the health insurance industry to come together.
“We have to have a total cross-section as members,” he says. “We’ve got to get the larger employee benefit consultancies in there, the larger PMI brokerages in there and possibly more IFAs. It has to be totally representative, with appointed reps etc, but it also has to be self-sufficient in terms of income generation. At the present time the only way it generates income is from membership fees but they are very, very low and from its annual conference which is down to the sponsorship that it gets from the industry. That is not a sustainable model financially.”
Above and beyond the financial imperatives behind running a trade association, though, lies the importance of ensuring that the entire industry maintains its professional standards.
AMII’s work with the Chartered Insurance Institute, for example, in developing the IF7 qualification to demonstrate competence and understanding of PMI, should be widely acknowledged, Pontin says.
Specialist brokers, he believes, should be proud of their role in driving up standards right across the PMI distribution field and IF7 should be the “minimum requirement” for independent advisers, employee benefit consultants, appointed representatives or direct sales professionals in the market today.
Pontin is aware, though, that some specialist PMI brokers might feel that they offer more than a qualification – and that their trade organisation should not be concerned with the skillsets of others.
But he insists: “We can exist with all forms of distribution, be that direct, be that appointed rep or be that an independent intermediary. It’s a big enough industry. I know it’s shrinking at the present time but it’s 10% of the population we are talking about. There is another 90% out there that haven’t got health insurance and they are going to need it.”
Rather than opening the sector up to more competition from general insurance brokers and IFAs, encouraging closer ties with BIBA, for example, will help the health insurance industry as a whole.
“The more the merrier with health insurance, as far as I’m concerned, because it grows the market,” Pontin says. “That can only be good. If the market grows, it’s good for all of the intermediaries involved and all of the members of AMII can only be better off for a bigger market. It’s as simple as that.”
INTERMEDIARIES LARGE AND SMALL
However, one form of distribtution which AMII has – as Pontin freely admits – struggled to engage with to date are the UK’s large employee benefit consultancies.
Why, I ask, are the likes of Mercer, Aon Hewitt, JLT Benefit Solutions and Lorica Employee Benefits not members of AMII? After all, they provide independent, intermediated advice on medical insurance.
“It’s a difficult nut to crack,” Pontin says candidly, “because they see the association as it stands exactly as you see it and perhaps even as the insurers see it, as this closed club for the individual and SME market.”
AMII has appointed a sub-committee which includes Stuart Scullion – formerly of Clinicare and now of major national intermediary Private Health Partnership – to challenge those assumptions. The big EBCs, Pontin says, should be aware that the industry they are operating in is changing.
“The EBCs may look at it and say, ‘well thank you very much, we are doing okay at the present time’,” Pontin says. “But if all around them crumbles it’s not a sustainable model.”
Like Scullion, Pontin himself works for a large scale intermediary, so the argumentthat AMII is for ‘small, SME-focused brokers’ doesn’t hold water, he says. Scullion, though, is also on the BIBA Health Insurance Focus Group, although that too is not an issue, Pontin says.
“I would rather see BIBA working with AMII as opposed to having its own focus group because I can’t see the need for two angles,” he argues. “But where AMII needs BIBA is because of its credibility and its reputation with both the media and the Government.”
Pontin argues that the fact that both he and Scullion work for intermediary firms of a certain size might help AMII to attract larger organisations to become members. He is mindful, though, of the association’s responsibility to represent the interests of smaller brokers too. After all, he himself ran a smaller brokerage – Pontin & Stein – before it was acquired by Jelf in 2003. He is acutely aware, he says, of the pressures smaller intermediaries face at the present time.
However, Pontin is also insistent that intermediaries of all sizes need to behave in an ethical way. The trend for commission sharing or kickbacks, for example, is something that needs to be stamped out.
Anecdotal evidence suggests that an increasing number of brokers are offering to rebate some – or sometimes all – of their first year’s commission to potential clients in order to win their business. Personally, and from a Jelf perspective, Pontin believes the practice has to be eradicated – and he believes AMII has a role to play in doing just that.
“I think AMII as an association needs to address it,” he says. “I think that the membership has to realise that it can’t be good, either for the distribution channel or the providers and that the answer should be level commissions. There should be – I don’t know what level it should be set at – a level playing field and you therefore win and retain your clients based on the added value that you bring to it. Because if the industry doesn’t self-regulate itself in terms of how it utilises commission kickbacks then it will be regulated.”
A DIFFERENT LANDSCAPE
Pontin estimates that “less than 5%” of the AMII membership base would argue against the introduction of level commissions on SME PMI business. However, while he says much of the responsibility for the situation lies at the door of providers he does have some sympathy for their predicament.
Whereas in the past they could use premium income to generate investment income, the economic downturn and an increase in claims incidence means that is no longer the case, he says. Both parties, though, are to blame.
“I can’t see how on earth they can propagate this high introductory, low renewal commission which then gives unscrupulous intermediaries the opportunity to use some of that high introductory to win business,” Pontin says.
Yet for all of the ills besetting the health insurance industry, Pontin remains defiantly upbeat about the future. At this year’s AMII conference he said there was “never a better time to be involved in private healthcare”. With waiting lists on the increase again and an even deeper mix of public and private becoming a “necessity”, insurance-style top ups are a certainty for the future, he predicts.
“We are at a huge, huge crossroads,” Pontin says. “This country can’t afford the healthcare of its population at the present time. It’s impossible for it to carry on in the format it is. There has to be greater cooperation between public and private. The future has to be a scenario where in terms of health insurance it’s top up products.”
As for AMII itself, Pontin says he is committed to guiding it through the crossroads he believes it faces, before handing on the baton to the next chairman when his tenure expires less than two years from now. Continuity is key if the association is to remain intact in the years ahead, he says, adding that he is glad that AMII’s executive committee includes some individuals who are in it for the long term.
“If I can finish my tenure where we’ve got corporate membership and we’ve got a membership which is representative of the whole of the distribution channel then that would be, as far as I could see, a great success and something for somebody else to build on,” he says.
“It will mean that there is some solvency, some financial stability and we are truly representative.”