As the world shrinks, opportunities for selling international private medical insurance are expanding. Demand for cover from people going abroad is growing fast. Fuelling this growth is the globalisation of companies, an increasing trend for retiring abroad and the fad for distant holidays – be it luxury trips for the middle aged or round-the-world tours by teenage backpackers.
Market leaders BUPA International and PPP International report business expanding at 20-25% a year since the mid 1990s – remarkable figures set against static sales of medical insurance within Britain over the same period.
So far there is no sign of a let up in this boom and the international market could receive another boost from an unexpected quarter. The Middle East housed huge expatriate colonies in the 1970s as oil money was turned into roads and hospitals built by foreigners. That has since abated. But insurers are being handed a bonus by new laws in the United Arab Emirates requiring foreign nationals to be medically insured. And Kuwait and Saudi Arabia are expected to follow suit, according to Graham Trueman, PPP International’s marketing manager. He says: “Kuwait is waiting on a court case and other Middle East countries are moving the same way. The feeling is that private medical insurance will become a visa requirement. That is the way it is going to go. It is becoming quite an issue out there.”
Britain’s invisible exports can only gain from the development, according to Trueman. “Britain is very strong in the international health insurance market. BUPA is our main opposition along with the IHI (International Health Insurance) in Denmark, but the majority of the players are of UK origin.”
Many of BUPA’s one million expatriate subscribers have no connection with UK, although the provident association relies on corporate deals to pick up international business. Typically, it provides medical insurance to a large company and then extends cover to all employees sent abroad.
Strong growth is also claimed by smaller operators such as ExpaCare, of Woking, Surrey. Managing director David Pryor says expatriates of all nations tended to look to Britain for medical insurance because of the City’s strong reputation and because schemes were not available in their own countries.
Pryor says: “We grew last year at slightly over 20%. We have not really had a bad year since we set up in 1982 because we are genuinely international, insuring 101 nationalities.
“Our expansion has continued despite recessions and oil crises because there are always new markets developing. The days of construction boom in the Middle East maybe gone, and we all know of the troubles in south-east Asia. But now the Governments of Vietnam and Cambodia are inviting in westerners and that is a source of new business.”
With 10,000 customers, ExpaCare claims third spot in the UK international insurance league table, although it is dwarfed by BUPA and PPP. But Pryor agrees strongly with 1 PPP’s Trueman: “Britain is still the centre for insurance, it is a major invisible export. The vast majority of our subscribers are not British nationals, but Britain is the natural place to look if you want cover. We find that many subscribers have nothing on offer in their own countries.”
Paul O’Sullivan, managing director of Primary International, which specialises in people retiring around the Mediterranean, also refers to business growing by a fifth annually. “Only 60% of our customers are from the UK. The rest are from places such as Germany and Scandinavia. There is a lot of movement within Europe, people want to get away from the weather.”
Niche operator William Russell, of Woking, Surrey, has 5,000 individual clients and 250 small companies, nearly all between three and 50 employees. The company has been growing steadily since launch seven years ago. Managing director Inez Cooper says: “Last year growth was just under 20%, down a bit because of the economic crisis in the Far East, although that is starting to pick up.”
But how geared-up are intermediaries to benefit from a market where all the barometers are set fair? Not very, according to respected opinions within the industry. Ray Stibbards, general manager of the compliance monitoring section of the Association of British Insurers, is concerned at knowledge levels among insurance sellers. Stibbards, an accountant with Pricewaterhouse-Coopers, reckons only 40 agents of the 5,000 representing ABI member companies could truly describe themselves as domestic PMI specialists. So even fewer are going to be up to picking the best international cover.
Specialist PMI broker John Stevens is blunter: “I would say there are virtually no intermediaries out there who have a clue about overseas. The problems are that it is very complicated and the market is small, if expanding. Intermediaries do not come across enough people looking for expat or multi-trip cover to get them involved in the subject.”
This could account for Stevens’s claim that 2,700 independent financial advisers and general brokers refer him clients. In return, Stevens passes back a proportion of the insurers’ commission. The industry norm for overseas PMI is about 20% initial commission and 10% on renewal.
Typical of the complications are those posed by multinational companies with a mix of nationalities based in one office. Expatriates based there need a different type of cover to indigenous employees. And some of these workers will be tripping off – three days in South Africa, a week in Beijing.
These companies need to know what cover is available – without sky-high premiums. Stevens names ExpaCare and Goodhealth, which has offices in Dubai and Hong Kong, as good all round performers.
Stevens’ dismay at PMI expertise among advisers is shared by Stephen Walker, of Brighton-based Medical Insurance Services. He says: “Insurers are being more careful about handing out agencies. They realise there is room for cowboys – which does not do the insurer any good and does not do the industry any good.”
However, Walker detects some increase in knowledge. And, asked to name the most appropriate plans for a typical range of new policyholders, Walker says he would include PPP Prestige, William Russell Premier Plus, InterGlobal and ExpaCare.
He also urges people to be wary of budget cover in countries where primary care and out-patient costs are high. He adds: “Most comprehensive policies provide cover for GP consultations and treatment, essential in countries such as the USA where fees are very high.”
As ever with medical insurance, chronic conditions are not provided for even in the most expensive plans, and brokers need to spell this out. Routine maternity confinement might not be covered either, although complications resulting from pregnancy probably are.
Among other pitfalls, says Walker, are expat plans in which individuals find themselves uninsured for a medical condition when they return to the UK.
For example, a policyholder might suffer a heart attack in the Far East, be treated, recover and subsequently return to the UK. A year later, if the trouble recurs, some plans would not cover treatment. And the policyholder could not switch insurers because their condition would be pre-existing.
This point is taken up by Peter Rousseau, international consultant to Farnham-based InterGlobal, which is underwritten by GAN, Reliance National and CNA Reinsurance. Such debacles could unravel disastrously not just for the policyholder, but for the broker, he says.
“The broker prefers to stick with investment advice, but nowadays that is not good enough. The client expects more. The broker gives excellent advice on pensions and life assurance but to him PMI is tail-end Charlie – he recommends the first thing available. The client gets sick, the claim comes in, it is rejected. It rebounds on the broker. The client says: `You sold me a dummy – the Rubber Duck Company down the road is giving a better deal and it sticks by its word’. Before you know where you are the whole business relationship is compromised.”
Rousseau attributed ignorance among brokers about PMI – whether domestic or international – to small returns compared to selling financial services.
He says: “If you want to sell PMI you have to go out to find a market. Some of the rest comes through the door. You say `You might die young so you need life assurance. Or you might live too long so you need a pension.’ But not enough thought is given to PMI. If you go to a broker and ask for PMI, he will say `Let’s do your other business first’.”
If PMI commissions look meagre compared to other financial products, as Rousseau argues, they are at least meagre proportions of decent sums. Just consider, medicine in America is notoriously expensive – and the premiums paid to cover it match. A couple in their mid-50s in North America would pay £7,032 a year for top-range BUPA Gold or £6,818 for PPP Prestige. Other top-range policy providers for this couple could be William Russell Premier at £6,067 or ExpaCare Special at £6,339.
Also noteworthy are the wide differences in top-range premiums. A couple in their thirties in Australia with two children could halve their costs with Exeter Friendly (£1,454) compared to ExpaCare (£3,290) or PPP (£3,276), although policies are not strictly comparable.
Most insurers are able to offer attractive rates in particular countries. They have local agents who can negotiate rates at the hospitals most in demand: the same principle as BUPA, PPP and Norwich Union employ with their UK networks. The bigger the throughput, the better the deal, a system which favours the big insurer or the small operator who is strong in one country.
One more reason why intermediaries need to swot up to sniff out the best deal.