With the number of players in the group PMI market shrinking, finding an insurance product that matches client requirements should have become easier. But advisers say that the opposite has happened, with little to differentiate between the remaining players.
“There are now too many insurers trying to be similar, especially with modular plans becoming the norm across the market. There’s not much in it between the top four in all honesty,” says Debbie Kleiner-Gaines, managing director of Best Health UK and a spokesperson for the Association of Medical Insurance Intermediaries.
As well as being able to pull together virtually the same cover for clients large and small, another area of benefit differentiation that is also disappearing is cancer cover. While Bupa used to be recognised as offering the most comprehensive cover, upgrades from Aviva, Axa PPP healthcare and PruHealth mean that clients seeking the reassurance of full cover now have much more choice.
Price is another factor, especially with employer budgets under pressure. But while the battle for market share has meant pricing has been competitive, some insurers say it’s still fairly consistent. Mike Blake, compliance director at PMI Health Group, explains: “One month, one insurer will be competitive, the next, it’ll be someone completely different. It’s not possible to know who will offer best value until you’ve pulled together all the quotations but we certainly don’t see one insurer constantly undercutting the others.”
This consistency may have come about due to pressure on their bottom lines but also because many advisers steer away from insurers who aggressively undercut the market. For instance Stuart Scullion, managing director of the Private Health Partnership, says his firm wouldn’t recommend a company purely on price. “Chopping and changing insurers every year isn’t the best strategy for the client. It’s easier to sell at a sensible price followed by sensible increases year after year,” he explains.
With cover and price so hard to call, many advisers will look beyond these factors to find a good match for their client. Kleiner-Gaines says advisers are in an ideal position to get beneath the surface of the benefits schedule and price. “Clients need to know whether their claims are actually going to be paid or whether they’ll have to fight, possibly while ill, to get them through,” she adds. “These questions are harder to answer but we are able to base this on past experience.”
But, while there can be differences in service standards, with some insurers failing to hit the mark all the time, Mike Izzard, managing director of Premier Choice Group, says that service is rarely a differentiator. “It’s a bit like a water table,” he says. “They all have their dips from time to time but they all address the issues and improve again.”
With service and cover no longer so much of a differentiator, some advisers look to a broader set of criteria to help their clients pick between providers. “We carry out research to try and establish the relative strengths of the insurers,” says Nick Boyton, principal, health and risk at Alexander Forbes Healthcare. “This looks at areas such as administration; claims handling; financial strength; market commitment and brand awareness. We then give this to the client with the price as we find that sometimes the research highlights something that’s more important to the client than going for the cheapest option. Value for money is what’s most important.”
Although, on the surface there’s little to choose between the insurers, some subtle differences are being introduced. Perhaps the most significant is Bupa’s decision to launch Open Referrals for its corporate clients, directing the employee to its preferred provider rather than leaving the decision to their GP.
Although Axa PPP healthcare already offers a similar mechanism through its Corporate Health Plan Pathways, which it launched in May 2010, Bupa has taken this a step further by making it compulsory. Matthew Judge, director at Jelf Group, says it is an interesting development that has split client opinion. “Some clients like it while others see it as having choice removed,” he explains. “It does give Bupa more control over costs and because of this I do think other insurers will look to introduce similar initiatives.”
The introduction of a corporate deductible plan by WPA, mirroring the insurance premium tax savings of healthcare trusts but without the pain of setting up the necessary legal structures, has also driven some differentiation in the market.
Although WPA was the only insurer doing this for the last couple of years, it was joined earlier this year by Aviva.
This has been welcomed by John Russell Smith, client director at Lorica Employee Benefits. “It was never easy for WPA to sell a unique product, especially to an employer who might have been suspicious about how these types of structures worked,” he says. “Now that two insurers are in this market, with HMRC approval for their plans, it will be much easier.”
And, while modular products enable insurers to appeal to a broad range of clients, insurers have also been actively filling gaps in their product ranges. Bupa has launched its NHS Cancer Cover Plus on its Corporate Select plan, giving employers a more cut-back cancer option. This provides employees with diagnostic tests and consultations until a diagnosis of cancer is confirmed. At this point, treatment is provided on the NHS unless it is not readily available, in which case the employee can be treated privately.
Another provider that has recently plugged its product gaps is Simplyhealth. Izzard says he has always considered it to offer either full fat or skinny products. “It’s merging Groupama into its offerings. This will give it a much broader range of products, much like all the other providers,” he adds.
But, while these developments are good news for the market, advisers would like to see more innovation in the market to enable them to offer their clients more choice. Kleiner-Gaines says there is room for improvement at both the large and small end of the client scale.
“For smaller clients, there’s often not much in it for business owners moving from personal rated schemes to a company scheme, especially once the tax has been factored in. At the larger end, the insurers don’t seem to have addressed how medical insurance fits into flex schemes,” she explains.
Wellness is also seen as an area that would benefit from greater insurer focus. Although all the insurers have included health and wellbeing benefits such as GP helplines and online health assessments, only PruHealth has really pushed the wellness button with its Vitality offering. Russell Smith would like to see more insurers going down this route. “We’re going to see more onus on employers looking after their employees’ health as a result of welfare reform. It would be great if insurers could incorporate this into their medical insurance plans,” he says.
Clients need to know whether their claims are actually going to be paid or whether they’ll have to fight, possibly while ill, to get them through
As well as launching new products, advisers would also welcome new entrants to the market. However, few believe this is likely. Blake points to PruHealth as the last to come into the market, adding that although it brought innovation with its Vitality model, it wasn’t an easy move. “It is a difficult market to break into,” he says. “It’s low margin business and, without a track record, it’s difficult to win market share. I can’t see anyone trying it unless market conditions change.”
Additionally, with barriers to entry high, Russell Smith argues that this is quite positive for employers. “All of the players left are committed to the market. They’re getting their houses in order and are serious about the market. It’s a good time for clients,” he explains.
Market conditions could be set to change in the next few years. While economic growth has done little to increase penetration in the past, government moves to reform the NHS and the welfare system may give insurers more incentive to innovate.
Judge agrees that a shift in what the NHS provides and what individuals are expected to provide themselves is necessary before any real growth happens in the medical insurance market. “There’s a hard core of mature purchasers that are constantly looking to get more bang for their medical insurance buck but there’s currently no incentive for an employer who doesn’t have cover to take it out. This could change as plans for the NHS are firmed up,” he explains.
On top of this, as the government’s welfare reform is rolled out, there is likely to be a bigger role for wellness-related benefits. Although group income protection policies already include access to vocational rehabilitation and early intervention, medical insurers could look to extend their wellness benefits into this area.
These developments are likely to create greater demand for medical insurance, attracting new players, more innovation and differentiation as insurers look to meet the more diverse needs of a growing customer base. Until then, while minor changes are happening in the market, it’s understandable that few are prepared to make the investment in any major changes.