With a growing customer base and an influx of new products, the group PMI sector celebrates yet another prosperous year. Sam Barrett explores the popular employee benefits Click here to download pdf (PDF, 2.5MB)
Year after year, the group private medical insurance (PMI) market performs well and 2007 was no exception with more businesses, large and small, enjoying the benefits of the cover.
"The market's been very buoyant, especially in the small-to-medium sized enterprise (SME) sector," says Mike Izzard, chairman of the Association of Medical Insurance Intermediaries. "This is continuing a trend from the previous year but it's been the best two year period for some time."
Figures from the Association of British Insurers support this, showing 4.34 million people were covered by corporate policies in 2007, an increase of 3.65% on the previous year. Additionally, take-up of healthcare trusts grew significantly in 2007 with 1.14 million people covered, an increase of 11.26% on the previous year.
As well as attracting new customers, the market has welcomed some new PMI products in the last 12 months. Possibly the most eagerly awaited was Standard Life Healthcare's modular product, Business Healthcare, which launched last July for groups of up to 250 members. It enables intermediaries to tailor a product to company requirements, selecting the level of cover, including healthcare cash plans and dental insurance as well as standard PMI and adding preventative modules such as employee assistance programmes and occupational health to complement the plan.
Prepare for take-off
Standard Life Healthcare is pleased with the response to the product. "It's going really well and we're seeing significantly elevated sales on this time last year," says Ronjit Bose, senior manager for proposition development and product management at Standard Life Healthcare.
Another benefit Bose sees to having a menu-based product is the flexibility it offers. "It's not yet a year old but we are keen to make sure it remains relevant. We don't need to completely change it but can tweak it as the market evolves," he explains. This could include adding new benefits or increasing the benefit levels in response to changes in treatment pricing.
Other insurers with more established menu-based products are tweaking their benefits. For example, Groupama, which has the original modular product, Clinicare's Sante, has recently improved its benefits. "Feedback indicated the core product was still in order but we wanted to enhance the peripheral benefits," says Andy Santoni, planning and pricing manager at Groupama.
This has resulted in the inclusion of travel insurance for leisure purposes and more flexible pricing so employees can extend some, rather than all, of their benefits to their dependants. "We expect to perform a similar review at some stage this year," Santoni adds.
Wellness has also featured heavily in product launches and revamps. "This was kicked off by the launch of PruHealth's group scheme with its vitality concept," says Izzard. "Since then several of the insurers have added wellness options or benefits such as gym membership discounts."
All well and good
Bupa offers all its group customers access to its online health and wellbeing assessment, Positive Health, and Norwich Union Healthcare's scheme includes gym discounts and its online and telephone based health service, Personal Health Manager.
Some insurers are taking wellness a step further by offering more integrated healthcare products. "We're looking more at blending our group products so there's more integration between medical insurance, risk and wellness," says Damien Lenihan, commercial manager at Bupa.
As an example he says a company could run a sickness absence scheme that links into PMI and income protection (IP). "This will pick up health problems at an early stage and you could get to a point where there are no claims going onto the IP scheme," he explains, adding that several companies are currently piloting this type of arrangement.
Norwich Union Healthcare has also introduced a more integrated approach in the last year. Its Health Protection Solutions brings together medical insurance, group risk and occupational health to help employers manage absence as well as their legal and financial risks.
Another interesting development in the group market is the imminent launch of National Deposit's group healthcare deposit account. Also targeting the SME market, this gives employers the opportunity to provide cover for as little as £30 a month for each employee.
Like the individual plan the friendly society has been offering, half the premium goes into a personal deposit account with the other half used to fund cover. Co-insurance comes into play on claims, with the employee meeting 10% of the costs.
Additionally, premiums are fixed for life with the employee getting to take the savings plan with them if they leave the company or they can use it to start an individual version of the plan. "It will be interesting to see how this is received in the group market. It is done very well in the individual market and it's good to see something different," says Izzard.
But while new products have helped keep the group market fresh, the main driver behind growth has been the price war being fought by insurers. This has resulted in price cuts from some providers intending to ensure they retain, or grow, their market share.
Standard Life Healthcare was among those that cut prices, reducing premiums on Business Healthcare a few months after it was launched. Bose says this was in response to competition. "We did cut prices but we're not interested in a land grab. We'll always price at a position that is commercially viable," he says.
Time will tell
Whether or not insurers have been under-pricing in a bid to win business is likely to become apparent in the next couple of years, especially given the greater uncertainty about how the market will fare.
The economic slowdown and prospect of oil at $200 a barrel are forcing businesses to take a more cautious approach to their spending. "I expect the credit crunch will have an impact on the group market. So far the focus has been predominantly on the individual but it will inevitably affect the group market," Santoni says, pointing at other issues such as rising fuel prices as factors that could stunt growth.
Izzard says he has already started to see a shift in the market. "I have seen some sectors, for instance estate agents, cut back on cover or reduce their group size. Clients are also looking for better prices, which is often possible in today's competitive market," he says. But while there may be early indications of trouble ahead there are a number of positive signs to offset the potential doom and gloom.
For starters, PMI is a very popular employee benefit. "Medical insurance is right up there as an employee benefit, often just second in popularity to pensions, so it's not easy to remove," says Bose.
Additionally products are much more recession-proof now. With their modular design it is easier for an employer to scale back cover while money is tight and then reinstate it when things pick up.
Another indication that the market still offers opportunities comes in the shape of new kids on the block Chartwell Healthcare. Launching this April amid economic uncertainty may have seemed like madness, but managing director Gary Noble is confident about the timing. "We do see a lot of opportunities in the group market, especially among companies with up to 50 employees. There's a lot of eagerness among our clients to look at wellbeing as part of their financial review," he says.
Noble believes this is being driven by an increased focus on healthcare issues generally. "Legislation is looking at health in the workplace and employers are much more conscious of the problems associated with absence and stress in the workplace," he explains. "Change it from an insurance to an employee benefit and package it with occupational health and wellness benefits and it becomes a very different proposition."
Bupa also reports positive data on its book, with expansions cancelling out any contractions. "We have seen one retailer cancel their scheme but we've also seen a number of large organisations extend their schemes to more employees," notes Lenihan.
However, he refuses to be complacent and acknowledges there are some challenges the industry must address. "We need to demonstrate the value of schemes as budgets get tighter. There's a lot of anecdotal evidence but we need to start putting monetary values into this," he explains.
So while sales could be flatter this year as businesses take stock of their expenditure, the group PMI market is in a good position to ride out the economic downturn.
- Sam Barrett is a freelance journalist.
