Your Health Fund is a health insurance plan that offers a choice of two cover levels:
* Level 1: Diagnosis Plus. This pays for diagnoses and outpatient treatments. Private GP consultations, diagnostics, therapies and minor GP surgery are covered.
* Level 2: Private Hospital Inpatient Cover. This adds inpatient treatment cover.
Unusually for a PMI style plan, the policy has a five year term but an annual review, and premiums are payable monthly. At the five year review, the plan is effectively re-underwritten, so the society could apply a medical loading or apply exclusions for the next five year period.
Clients can choose full medical underwriting or a 5/2/2 rolling moratorium.
Also unusually for a PMI plan, each premium is split into two parts. For a Level 1 plan, £25 a month goes into the client’s personal claims fund and a multiplier is applied. National Friendly then adds a £100 notional balance, taking the fund to £125. This gives the client an initial claims fund (from which any claims will be paid) of £625 – i.e. five times the claims fund, the 5x multiplier staying the same throughout the five year term. Over time therefore, assuming no claims are made, the available claims fund increases by £25 x 5 (£125) a month. At the end of the five year period the fund would be £100 + 60 x £25 = £1,600 x 5, giving a total available fund of £8,000 if no claims were made.
However, any claim will reduce the available claims fund. If there is not enough in the fund to meet the claim, the client could use any available claims fund and meet any shortfall themselves.
The second part of the premium goes into an insurance fund to cover the claims risks (in effect paying for the multiplier and the initial notional £100 in the claims fund plus all the insurer’s costs).
At the end of the five year period, the client can withdraw any money remaining in the claim fund (less the £100 initial notional amount).
For a Level 2 plan, inpatient treatment is added, but this is subject to a claims limit of £25K a year. That sum is outside the claims fund, which is still there to cover Level 1 plan benefits – Level 2 in effect being an add-on to Level 1. The £25K limit cannot be carried over if unused – in effect, a new £25K limit applies in each policy year. The treatment date, not the invoice date, determines which policy year is used to fund the treatment.
Level 2 plans include cover for inpatient and daypatient treatment; medical appliances and prostheses; post-surgery follow-ups and monitoring; removal of impacted wisdom teeth; private land ambulance; complications of pregnancy, and NHS cash (a fixed cash allowance as an alternative to private treatment for some procedures).
Clients must be between the ages of 18 and 70 at the start of the policy term and they become voting members of the society on joining.
Claims are handled through AXA PPP healthcare and terms and conditions are explained in a 56 page document. If the policy is cancelled at any time, any money remaining in the claims fund (less the £100 nominal initial sum) will be refunded.
What They Say
Chief executive Jonathan Long said: “As our claims experience is now much less volatile, and we have the backing of a major reinsurer, we are now ready to start writing new policies again.”
What We Say
"Let’s deal with the elephant in the room first. Five years ago National Friendly withdrew from writing new health insurance business due to higher than expected claims experience and capital adequacy issues. Its product design had perhaps been too generous and the resulting withdrawal was a difficult time both for the society and for the brokers who had supported it.
"Now however it is back, a little bit older but is it a little bit wiser too? And how does the new proposition fare in today’s market?
"As before, the plan is a radically different approach to PMI and includes splitting Level 1 premiums into two parts, building up a personal claims fund (using a simple gearing mechanism) that most rewards those who claim rarely or not at all. At the end of the five year period, any sum remaining can then be withdrawn, as it can if the plan is cancelled before then. In effect therefore, this is a general insurance policy with a surrender value feature.
"Does the plan make sense, given both its current design and what happened before? It’s certainly not for everyone and it is complex. Trying to explain it comprehensively won’t be quick or easy, but the plan could appeal to those who don’t expect to claim much but who want the security of having PMI cover just in case and who want to pay less for their PMI cover.
"The main risk is that the policy only lasts for five years, after which time the client is effectively re-underwritten. If their health has deteriorated, any new policy could therefore be on much worse terms. Conventional PMI does not do that.
"In the early days too, Level 1 plan claims are limited by how much has accrued in the claims fund (less any claims already paid) and Level 2 benefits are subject to a £25K annual limit. Again, conventional PMI does not do that.
"The potential market for this plan is therefore much smaller than for conventional PMI but, for those who understand it, and are happy to effectively risk share with their insurer AND who are confident their health will remain good well into the future, this rather quirky and unusual plan could well appeal.
"And the problems of five years ago? National Friendly says it now has the backing of a major reinsurer. That could be important, not least because such organisations have a wealth of underwriting and insurance experience and expertise that can both help in product development and also in avoiding the kind of problems that hit the society before. Having AXA PPP administer claims also buys in to its experience and economies of scale."