With at least ten major insurers offering products in the group income protection (IP) marketplace, a full market review for a client should be child’s play.
However, when Private Medicine Intermediaries (PMI) received a request from a major chemical manufacturing corporation seeking to cover over 200 key staff at two sites, and with a fairly dreadful claims history, the outlook was not so rosy.
Eight insurers refused point blank to offer terms and only one other insurer, apart from the existing scheme holder, could be tempted to take a look at the proposition. Some new innovative thinking was needed.
The client had two IP schemes operating under one umbrella and both were being looked after by different intermediaries. Intense competition to gain the whole scheme put extra pressure on PMI to find a solution to the problem.
The chemical corporation had also asked us to obtain costings based on 50 and 75 per cent gross salary and 90 per cent net pay benefit basis. Naturally the client wanted a fair and reasonable renewal premium and continuing high standards of administration.
I soon discovered that only Unum and Legal & General would provide terms for an amalgamation of both schemes. Generali, the current insurer on scheme one, refused to offer terms for the second scheme. It was willing to reconsider its position if claims experience improved during 2002, but this meant it was unwilling to quote on the combined scheme until 2003.
So what could be done to turn the schemes around within 12 months?
I secured a significant improvement on the renewal rate from Generali for scheme one, principally because the insurer had confidence in the scheme improving due to several key factors.
These included excellent health and safety procedures in place on site and the outstanding attitude of the employer to rehabilitate claimants.
Other factors that greatly assisted the offer of improved terms were evidence of lighter duties on site than previously anticipated, some large ongoing claims coming to an end and the insurer’s keenness to retain the business in face of stiff competition from Unum.
Unum gained a similar impression of the client’s determination to control claims and also offered revised terms for scheme one.
Similar measures would have to be put in place at the other site for the second scheme to secure better terms. Consideration would have to be given to change the benefit basis from 90 per cent net pay to either 75 or 50 per cent gross pay and to emulate the occupational health facilities and long-term sickness management provided for staff at the scheme on site.
I was also able to offer the assistance of PMI’s sister company, Corporate Medical Management (CMM), to facilitate improvements with occupational health management and medical screening on site.
Unum was able to bring into play its extensive experience of the US market where, arguably, industrial and chemical health-related group IP claims are often extremely complex. About two years ago it introduced a “Definition D” clause to its UK contracts, modelled on American principles, which limits claims for psychiatric and physical conditions.
Given that nervous and mental disorders can usefully be divided into high, medium and low severity, under this clause claims can be controlled.
A simple example of how this applies is demonstrated by looking at particular symptoms. At the high-severity end of the scale these could be psychoses such as schizophrenia and manic depressive psychosis. No limitation would apply as there are many observable features.
At the low end of the severity scale are the majority of cases of depression and anxiety. Here the diagnosis is often based on self-reported symptoms and limitations would apply. The intermediate severity cases may or may not have objective findings and so each case is judged on its own merits.
The same general principles also apply to physical conditions. Limitations may or may not apply, but here individual consideration is given to each case.
The client had three options. First, both schemes could remain with the holding insurers, with PMI acting as intermediary for both. Alternatively, both schemes could transfer to Unum at competitive rates. Finally, scheme one could remain with Generali and scheme two could transfer to Unum.
With the objective of controlling claims, the client chose to move both schemes to Unum, with PMI acting as broker for the entire group scheme. The added value of professional advice from CMM to assist in keeping claims under control means product innovation and proactive involvement by broker and insurer won the day.
Linda Cooper is account manager with Northwich-based Private Medicine Intermediaries