If you think selling protection for UK-based clients is tricky, spare a thought for brokers and intemediaries dealing with expatriates.
Once a client moves abroad, selling protection products such as life insurance, critical illness (CI) cover and income protection (IP) moves into very difficult territory. It’s almost like a foreign country out there.
Worse, the terrain has got even tougher over the past decade, as most mainstream insurers have lost heart and decided to stick to home ground.
Selling international private medical insurance (iPMI) is relatively straightforward by comparison, and remains the key focus for brokers.
A decade ago, the market for selling protection to expats was strong and healthy, says Tim Harvey, managing director of UK-regulated brokers Offshore Online.
“Most UK insurers would allow you to write business with them, no problem,” he says. “Then there was a change in EU law. Insurers had to create an entirely separate fund for international business. Previously, they could jumble all the business together. Writing this kind of protection became too expensive overnight.”
Now, brokers might write level term assurance, and perhaps the occasional CI policy, but other valuable forms of cover, such as family income benefit, are no longer out there, Harvey says.
“The EU is increasingly interfering with the provision of arm’s-length advice,” Harvey explains. “We often have to wait until the client returns to the UK before we can sell them a product. Sometimes people have to leave one country to sign a document in another country. That isn’t exactly ideal. Or they go without cover altogether until they finally return to the UK for good.”
OUT OF THE MAINSTREAM
Harvey says expat life insurance should be a mainstream product, but in practice it is highly specialist.
“Most of our sales are in the Middle and Far East, China and Latin America,” Harvey says. “We do have clients in Russia, but getting underwriters to cover them isn’t easy, because personal safety is a big issue.”
One “good old-fashioned insurer” does offer life cover: Friends Life.
“There are precious few others. I would like to see a big insurer such as AXA enter this market,” Harvey says.
Steve Nelson, sales manager at April Medibroker, says very few of his iPMI clients ask about life cover, and even fewer about critical illness.
“There aren’t many insurers we can place individual business with,” Nelson says. “Friends Life, William Russell and Expatriate Healthcare are the only ones we use. We also arrange group life insurance through Lloyd’s of London. If you go direct to the market with a group they will give you a price.”
International life cover tends to be more expensive than standard UK policies.
“Even when we are asked to quote for cover, the cost is often so high our clients don’t want to know,” Nelson continues. “I can’t see why somebody living in Dubai should pay appreciably more for life insurance than somebody in the UK. After all, the payout is just the same.”
Many expats take a chance and go without life cover, Nelson says.
“It doesn’t seem a priority when people are moving abroad,” he explains. “That isn’t a chance I would like to take, but they do, even those with families. We have considered developing in-house products for expat clients. There must be a big market there.”
Selling international protection is easier in some markets than others, says Guy Stephenson at MediCare International.
“UK-based brokers face huge problems selling long-term life cover to anybody resident in another EU country,” Stephenson says. “Most expats based in Europe should talk to a local insurer.”
The US is a no-go zone.
“It has a strong domestic sector,” Stephenson points out. “Any broker moving into this market would also need extra professional indemnity cover, due to the danger of being sued. It just isn’t worth the cost.”
Brokers do better writing long-term life cover in traditional expat markets such as Hong Kong, Singapore, the Far East, Middle East and Africa, Stephenson says.
Even large UK-based iPMI insurers baulk at offering other forms of protection to expats.
Robert Morrison, chief underwriter, Aviva, says: “We offer iPMI cover for expats but they need to have a ‘home’ connection to the UK before we can provide term life or CI cover. They can work overseas, but they must be resident in the UK. Our underwriters also take account of their regular travel destinations, to reflect the relative risks associated with those particular countries.”
There is one exception.
“If the customer took out life or CI then emigrated years later, the policy would normally remain valid,” Morrison says.
Friends Life does offer life insurance for expats. Its International Protector policy range offers life, disability cover and critical illness within one plan.
Most providers have pulled out of the market, due to the specialist demands and extra cost, says Irvine Baxter, UK sales director, Friends Provident International.
“This a niche opportunity, but most brokers have at least some internationally-mobile clients,” Baxter explains. “Life assurance is the cornerstone of financial planning and will be high on the agenda of any holistic advice offered by advisers. PMI and life assurance are complementary rather than competing products.”
Its International Protector plans offer cover in a wide range of countries across Africa, Asia and the Middle East, but Baxter says some destinations are too risky to underwrite.
“Commission rates are similar to UK levels, but because premiums tend to be higher, so is the total payment,” he says.
Insurer Expatriate Healthcare offers multi-term international term life insurance and IP, says group underwriting manager Lee Gerry.
“A few providers also offer international life policies, but only on an annually renewable basis,” he explains. “Individual customers generally want multi-year terms as they are either looking for long-term personal protection, with guaranteed premiums, or they want to protect a major financial commitment, such as a loan or mortgage.”
Expatriate Healthcare is developing an online fulfilment and enrolment facility for international term life.
“This will allow instant cover and monthly premium collections,” Gerry says. “It is the first of its kind and will be available in 68 countries.”
According to Gerry, too many expats wrongly assume their domestic term life policies are still protecting them abroad.
“But their cover is ineffective once they permanently move abroad,” he says. “Customers have been distressed to learn they were not covered.”
He says Expatriate Healthcare’s international term life offers true worldwide territorial limits.
“Premiums are rated on your initial country of residence and the policy protects you even if you move country or return home,” he says. “Clients are buying a fully-passported, future proof policy, giving them total peace of mind.”
iPMI insurers shy away from offering life cover because it is a very different underwriting proposition, Gerry believes.
He explains: “You need different licences to underwrite this class of business. It calls for actuarial-based underwriting and these skills aren’t that widely available.”
Given the relative lack of demand from clients, some brokers don’t want to get involved. The Private Health Partnership sells plenty of iPMI but negligible amounts of international group or individual protection, says managing director Stuart Scullion.
“It’s not that we won’t, but we have very few enquiries,” Scullion explains. “People ask us to set up iPMI, but very few request individual risk products.”
Clear Insurance Management does sell international life, CI cover and IP, both on a group and individual basis. But Michael Cooke, employee benefits director, says it isn’t easy.
“IP for expats, either group or individual, is particularly difficult to source,” he explains. “How do you measure work absence? In which currency do you pay the benefit? These are difficult questions to answer.”
The company regularly arranges life cover, but setting up a policy can be slow going.
“You have to consider how the benefits will be paid, in which currency, and so on,” Cooke continues. “Pricing in the local currency is often a problem, because conversion rates can change dramatically. We often price the sale entirely in dollars, from the premiums to the policy payouts.”
Cooke explains that commission on international life policies can be higher, sometimes as much as 10% to 15%, compared to 4% or 5% in the UK.
“Premiums are higher as well, which helps, but unfortunately, so is the admin,” Cooke continues. “You have to do a lot more work just to set up the policy.”
The problems really start where members are above the free cover limit, and need a medical.
“That can be difficult enough to arrange in the UK, even more complicated overseas,” Cooke points out. “Sometimes you can wait six months to get all the results and complete the application.”
Cooke has seen growing interest in key man business protection for expats.
“Banks, finance houses and venture capitalists are increasingly insisting on key man cover when funding overseas start-ups,” Cooke says. “Mainstream UK insurers are not geared up to offer this. We typically use Lloyd’s of London. We can even place cover for workers at mining and exploration companies in high-risk African countries such as Liberia, where many international PMI companies are reluctant to offer cover, because of the limited medical facilities.”
JBI Insurance Brokers sells both term and annually renewable life insurance to groups and individuals, as well as personal accident and IP cover. Section head Sue Bailey says IP is particularly important for expats who are working freelance or self-employed.
“If they can’t earn and don’t have large savings, they will still have to pay living costs in a country where there may be no social provision,” Bailey says. “But it isn’t easy to set up.”
It can take weeks if not months to set up an international life or IP policy.
“You are dealing with somebody on the other side of the world, who may need to arrange a medical, provide proof of residence, and supply a certified passport photograph, to comply with money-laundering regulations,” Bailey explains. “There is an awful lot of work for comparatively little reward. I have just completed a life insurance policy I started last July. The broker earns their commission to the penny.”
According to Bailey, not everybody has the patience.
“This market certainly isn’t for those who want a fast buck,” she says. “But this is a service many of our clients want, and therefore we give it to them.”
International protection is indeed a foreign country, but many brokers feel they owe it to their clients to go there.