The dramatic exit of niche private medical insurer OHRA’s backbone staff, following their company’s takeover by Norwich Union Healthcare(NUH), has left intermediaries unsure of how to advise their OHRA clients.
In the short term, NUH has stepped in to run the company and field calls. However, the giant insurer has yet to announce its long-term intentions towards OHRA’s future.
To private medical insurance (PMI) specialists, the takeover seems a marriage of two unequal, even opposing, partners. Whereas OHRA is a small insurer with a few products which sell mainly on their guarantee to cap premium increases, NUH is a huge general insurer with a large PMI portfolio.
OHRA stands out as a favourite insurer among key medical insurance intermediaries. In a recent poll conducted by the Association of Medical Insurance Intermediaries (AMII), members of the association were asked a range of questions about service levels provided by PMI providers, including response to amendments, telephone calls and letters, commission settlement and how intermediary friendly various insurance companies were.
AMII chairman Bill Poynton says: “OHRA is one of the most user-friendly organisations that anyone could want – from the administration to the claims handling. It is no wonder it came out top in terms of intermediary friendliness in the survey.”
Overall, OHRA came second only to the Permanent Health Company, leaving the giants of the industry, such as Bupa, dragging their heels.
And although a small player in the UK, OHRA is one of the largest and best known insurers in the Netherlands. Founded in 1925 to provide medical expenses cover for senior public servants, OHRA now issues most types of insurance to over one million members in Europe and elsewhere in the world.
Being a mutual company, unlike Norwich Union, profit is not OHRA’s motive. In 1990, OHRA extended its activities into the UK. The objective was to provide high quality private medical expenses insurance at a reasonable price. It certainly has done this.
Medical Insurance Services intermediary Stephen Walker has a large OHRA client book. He says: “I tell my clients that OHRA, although small in the UK, can be described as the Bupa of Holland.”
NUH is the healthcare arm of Norwich Union and, like OHRA, was founded in 1990. The company’s range of products include PMI and income protection.
Also like OHRA, NUH is based in Eastleigh, Hampshire. However, it has other offices in Southampton and Sheffield, employing a total of 850 staff, dwarfing OHRA’s 16.
NUH is the UK’s third largest provider of PMI, after Bupa and PPP, with a nine per cent market share. Its total gross written premiums for 1998 were £155m. The fact OHRA was to come under the NU banner has been known for a while, as the UK PMI arm of OHRA belonged to CGU whose merger with NU was announced in May this year.
The mega merger company CGNU, the UK’s largest insurance group, with worldwide premium income and retail investment sales of £26bn, will be called Norwich Union in the UK from this month.
However, NU became involved in the running of OHRA three months earlier than anticipated following the dramatic exit of the backbone OHRA staff.
To some extent the takeover is helped by the proximity of the companies – both are based in Eastleigh. What is not convenient is the product incompatibility of the two companies.
NUH has 12 PMI products in its portfolio. The best know of these is Fair and Square – a comprehensive PMI plan which offers a choice of private or NHS treatment with a cash back sum following a private specialist consultation. The portfolio also includes Express care, a comprehensive PMI plan; Personal care, a low cost, but full refund PMI plan; and Trust Care, a comprehensive PMI plan enabling private patients to have access to NHS pay beds. Trust Care Starter is a low cost version of Trust care (the cost is kept low through the exclusion of most outpatient treatment and consultation) and Select Care is a low cost PMI plan.
But nowhere is there an equivalent to the OHRA product and its guarantee to cap premiums.
OHRA guarantees that whatever your age, you will never have more than one age-related premium increase during the lifetime of the policy. For example, if you join at age 29, when you reach 30 your premium will rise to the 30-39 age band and no further. So the client will never pay more than a new entrant aged 30 – even when they are 70.
Another unique feature on the OHRA policy is alternative and complementary treatment without referral from a GP.
Walker says: “NUR’s portfolio is very unwieldy. It has 12 different policies all trying to find a little niche here and there – but they are expensive. There is no equivalent to OHRA in the NUH portfolio.”
At NUH the age related increases are generally in five year bands. Walker says: “It becomes horrendously expensive from age 65 onwards. Many people end up dropping the policy when they reach that age.
“If you were being cynical, you could say that is what the premium set up is meant to do – exclude people when they get older, start claiming and, therefore, start getting expensive.” Another problem is posed by the different remuneration structures of NUH and OHRA. OHRA is unusual in that all policies renew once a year on 1 January which means OHRA only pays commission to intermediaries once a year. It also rewards loyalty.
NUH managing director Mike Siomiak has gone on the record as saying no changes will be made to the way the OHRA portfolio is run until 2001.
However, Walker says: “I need to know what it intends to do beyond that. It is not good enough for NUH to sit on the fence.”
The Onion Group principal Penny O’Nions says: “I don’t want to find the OHRA premiums go berserk. NUR’s inflation rates are much higher than OHRA’s. I don’t want the terms of the OHRA contract changed.”
Poynton says: “I would like NUH to maintain OHRA as a separate entity. There is no reason it can’t carry it on as an OHRA scheme. OHRA has a good reputation – it would be a shame to see it swept into the Norwich Union whirlpool.” However, swept into the whirlpool it will be, as NUH has stated it will replace the OHRA name with its own.
But with the Office of Fair Trading’s concerns about rising PMI premiums in mind, intermediaries believe the industry as a whole needs OHRAtype products. The only other insurer currently in the market which caps premium increases is Exeter Friendly Society.
Unfortunately for intermediaries and their clients, NUH says it is unable to comment on the situation further than Siomiak’s statement as its legal team is looking at the OHRA guarantee and what is is and isn’t allowed to do with the OHRA portfolio.
NUH business manager (partnerships) Richard Halley says: “We’re trying to reassure intermediaries but it is just too early to give details. We want to get it right.”
Walker is concerned that there is no regulation in place to stop NUH if it wanted to renege on the guarantee.
He points to the example of American company Foundation Health which pulled out of the UK private health insurance market in 1997 after only three years’ trading. Walker said this left clients high and dry, having to seek a new insurer and undergo new underwriting although they may have suffered ill-health in the meantime.
“It is a cavalier attitude,” he says. “With medical insurance you’re looking at a different kettle of fish to car or household insurance. People may develop problems and are stuck with the insurer. It’s not acting in the best interests of the general public.
“We need to see a situation where if there is a guarantee on the policy any new parent insurer has to take on that guarantee. People need long term commitment on behalf of insurers.”
Despite his concerns, Walker thinks intermediaries have to give NUH a chance to show its cards.
“NUH might surprise us and we need to approach it with an open mind,” he says.
While intermediaries await with trepidation the decisions of NUR’s lawyers, they may be comforted to know the ex-OHRA staff are about to launch a new company.
The new venture is headed up by Hazel Berrill, the ex-OHRA marketing manager, who was director of OHRA since November 1999. She has taken nine OHRA staff with her to the new venture. The backing is in place, the underwriting is in place and the company is due to launch this month. A spokesman says the products will be “different from OHRA’s and different from the rest of the market”.
O’Nions says she hopes they make it onto the A-list. “I’m keeping my fingers crossed for the ex-OHRA people that they come up with something that appeals to the masses,” she says.