Early July saw the aims of the PMI panel come to fruition, when on July 1 it met its self-imposed deadline to take action to rectify the criticisms contained in the Office of Fair Trading’s (OFT) reports on health insurance. And history may credit it with a more important role, marking it as the first step to placing a more positive light on the perception of the industry.
It took two reports by the OFT to force the change. While the first received a poor reaction, the second prompted an expansive response, with most providers getting involved. “This is one of the first issues the industry has really pulled together on,” says John Castagno, marketing director, protection, Legal & General. “We hope to see more of this in the future.”
PPP is similarly upbeat. “As part of the all-industry panel addressing the OFT’s concerns we welcome the opportunity to improve clarity of information for consumers within the private healthcare market,” says Emma Grainge, PR co-ordinator.
Three principal issues were hauled into the critical arena. The comparison of products was deemed too complex; providers were reprimanded for giving inadequate warnings about premium increases; and moratorium underwriting was criticised for evading consumer understanding.
Both the Association of British Insurers (ABI) and the Association of Medical Expenses Insurers (AMEI) had remits which could have responded to part of the OFT’s criticism, but neither was wholly responsible. As a result, it was decided that a fresh group should be established. “Neither of these groups covered all companies and so the joining ensured that it was a pan-industry working group,” explains Gillian Gibbons, public relations manager at Prime Health. Eight providers form the base of the panel, with many others contributing submissions.
The panel responded formally to the OFT through chairman, Nicholas Beazley, head of strategic planning at BUPA, on September 30, 1998. “The industry has taken a constructive approach to the report and believes that it has met the OFT’s requirements,” he said. “We have consulted the OFT throughout and it has acknowledged the progress which has been made.”
Fundamentally, the aim of the panel was to introduce strict standards of confidence and transparency into the market. A deadline of July 1, 1999, was set to implement the recommendations and short, medium and long terms plans were made.
The OFT expressed approval. “From the industry’s early responses to our second report, it seemed the reaction would be more positive then that to our 1996 report,” said Bill Davey, an official at the OFT consumer affairs division. “The message from representatives and from the industry itself was that there was a genuine desire to improve consumer welfare and that the second health insurance report had provided the catalyst to get this process started.”
To achieve this, the panel’s objectives were three-pronged. The first was to address “industry-wide issues to enhance and maintain standards and thereby improve the reputation of the industry”. Included in this was the panel’s long term commitment to the industry – and although, so far, the panel has restricted its work to the OFT’s observations, in future it intends to continue addressing any concerns raised about the industry.
The second element was based on the development of public policy. It was agreed that this was essential for the panel to direct debate concerning “new models of national healthcare provision through public private partnerships”.
Consumer perception of the industry was the third and final part of the equation, with the panel intending to improve consumer estimation of PMI products.
In response to the OFT’s observation that products were incomparable, a number of core terms were devised. The panel came to the conclusion that a benefit table would be the simplest way for consumers and intermediaries to compare products. Consequently, it produced a core benefit table enabling at-a-glance product comparison.
Another area of concern was price increases, which have provoked a vicious circle of bad press and consumer criticism. With PMI premium increases frequently exceeding the inflation rate, customers have been horrified by the levels of their subscriptions and felt cheated. But how to warn the consumer of this was a problem for the industry. After all, providers and intermediaries did not want to deter the client from purchasing the benefit altogether.
The panel recognised that there is low awareness of the genuine reasons for premium increases. Because this has heavily damaged the image of providers, the panel has paid close attention to its repair. “Consumers need to be made more aware of what contributes to increases,” says Gibbons. “The OFT has recognised and accepted the reasons that premiums went up and what insurers took into account, for example, rising claims and medical advances.”
Although the first OFT report rejected moratorium underwriting as customer unfriendly, the second conceded that, so long as consumers understood the implications, moratoria underwriting could continue. Now when a consumer is offered a moratoria product they must also be given the option of full underwriting.
Much of this information has been disseminated through the consumer guide. Although it is similar to the ABI’s existing guide, the PMI panel’s edition contains more detail, as well as documenting how PMI works and what it typically covers, it also addresses the majority of the OFT’s observations. It is now distributed to every consumer who expresses interest in purchasing PMI. Additionally, PMI brokers must supply their clients with the guide.
The core benefit table is included, enabling simple product comparison. A full, but clear, description of the difference between moratorium and full underwriting is also set out.
The premium increase issue is addressed by a full explanation of factors affecting subscription rates, with an advanced warning for potential customers that significant rises to premiums are a possibility. It is hoped that this will prevent health insurance customers becoming disenchanted.
The guide also promotes the use of intermediaries, encouraging consumers to consult a broker for more detailed information. Castagno agrees that the consumer guide is a solid starting point for customers who may need to make further enquiries. “The guide highlights the main points that customers should consider and then consult an intermediary about,” he says. “And it’s a good prompt for them to ask more relevant questions.”
Further support for brokers has been made available through PMI intermediary seminars, arranged by Prime Health. Designed to reach as many intermediaries as possible, the seminars were held throughout the UK, roadshow-style. Detailed lectures and information were dispensed at the seminars and brokers were encouraged to raise and discuss any issues they felt were problematic.
With intermediaries keen to contribute to the image clean-up of the health insurance market, turnout at the seminars was high. Many intermediaries are already fully informed of good practice but feel the action is worth supporting. “It is necessary for the market place in general and will hopefully drive professionalism,” says intermediary Larry Bulmer, partner at Healthcare Decisions. “It is well designed. But I still say what they are doing is what we as intermediaries have been doing all along.”
For intermediaries unable to attend the seminars, Gibbons confirms that details of clarification and samples of documents will be sent out. She adds: “There will also be information on how changes will affect intermediaries.”
A number of industry-related bodies were consulted in order to produce the guide, including the Financial Services Authority (FSA), the Insurance Ombudsman Council, the National Consumer Council and the General Insurance Standards Council (GISC).
The response, as Gibbons explains, was positive. “We have been consulting the GISC particularly on the code of selling. There is to be a meeting with Chris Woodburn regarding how we can work with them and install effective regulation.”
She adds: “The FSA was very supportive of the proposals and pleased to see we were looking after consumers. It was an information exercise as it is not involved with the health insurance industry at the moment. It maybe that in the long term it may have more interest.”
As far as the future is concerned, the PMI panel definitely looks set to fulfil its promise of a long term commitment to the industry. “We think that there are other things the industry can improve,” enthuses Gibbons. “Because of the OFT’s timescale, so far we have focused on its observations, but we will continue to meet regularly to discuss other issues.”
Issues already on the agenda are regulation and a proposed code of selling. In the past, it has been difficult to ensure that brokers are equipped with extensive product knowledge because of the absence of regulation. And, although an ABI code of practice already exists, the panel is hoping to produce more stringent suggestions.
Richard Galley, technical support manager at BUPA is drafting the paper, which will be passed to the GISC for approval. “It will be a revised version of the ABI code we already have, but we need to look at developing training and competence,” Galley explains. “We have had feedback from intermediaries. They are a link we need to be more involved with and we see them as very much part of the process.”
As the proposals begin to take effect, it seems the industry can only benefit, so long as providers and intermediaries maintain and develop their adhesion. The PMI panel is an ideal forum and one that has seized the industry’s attention. As Castagno says: “The panel should definitely stick together. There is an opportunity to continue the momentum and that is something we definitely support.”