As healthy prospects are predicted for group PMI, Johanna Gornitzki explores the relatively unchartered territory of SMEs and what hurdles lie ahead for employers
Three in four brokers believe the group private medical insurance (PMI) market will grow over the next 12 months, continuing the trend of increasing sales documented over the past year.
According to research conducted by COVER, which polled readers specialising in the group PMI field, some 73% think the sector will be in for another booming year, while only 4% believe it will reduce "a little". None thinks the market will drop significantly.
"The economy right now is buoyant and it seems that employers are happy to spend money on PMI - long may it continue," says Brian Mulreany, marketing director of Essential Healthcare.
There are major opportunities for advisers in this market. The small to medium-sized enterprises (SMEs) sector, in particular, seems to be offering a vast array of untapped prospects. Some 62% of those surveyed suggest SMEs provide the main opportunity for new business, while 19% believe the self-employed sector is where they will derive most of their business from. Another 17% still believe their rebroking sales will provide the main source of growth.
Mulreany is not surprised that so many advisers think the SME sector is where the opportunities lie. He says: "Our experience of the UK market is that there are good possibilities for growth in PMI sales to the SME sector and particularly firms of two to 15 employees."
"Recently, we have noticed an increased uptake in blue-collar firms, such as small builders, plumbers and garages, taking out cover for the first time. Previously, it tended to be only white-collar professional firms, such as lawyers and accountants, that bought cover."
However, in order to break into the SME market fully, four in five (83%) advisers believe the industry or the Government have to launch a PMI awareness campaign, highlighting the need for PMI, the research reveals. Another 37% think more targeted products would be the best way to approach this sector. One of the brokers responding to the study said: "There are still a large number of SMEs without any cover at all - husband and wife partnerships or professional practices can all be targeted - but a 'one-size-fits-all' approach will not work."
Although the future looks bright, with many opportunities in the group PMI market, there are still a few hurdles that are hindering sales. The cost of the cover, employers' lack of knowledge about PMI and complex sell, are the most commonly cited. However, the industry's reluctance to catch up with the rest of the financial services sector when it comes to offering quick quotes online seems to be a growing problem.
Nearly half (49%) think group PMI is too expensive, making price the biggest obstacle in this market, while employers' lack of knowledge about PMI is coming a close second (30%). According to the poll, 23% also think PMI is a complex sell, making it difficult to grow in this market. Moreover, half of the questioned (50%) intermediaries do not think providers are offering enough support when selling group PMI.
Commenting on these findings, Mulreany says: "Personally, I think group PMI is still far too expensive, and if the providers were more efficient then I'm convinced that economies can be made and premiums lowered."
"Sometimes providers don't help themselves. One well-known provider recently told me they were working to a four-day turnaround for SME quotes - men walked on the moon 37 years ago and some providers still can't get quotes out within 24 hours. Better service, lower premiums and more menu-based policies are the way ahead," he adds.
Disagreeing with Mulreany, Adrian Humphreys, managing director of corporate business at WPA, says: "Lots of brokers say PMI should be cheaper, but at the end of the day they have to do some of the work too if they want to see premiums lowered. By, for example, going through the full underwriting process, many clients will be able to get cheaper premiums.
"However, many brokers only switch business because it means minimum work for maximum revenue with little thought about what a customer actually wants. The customer then thinks the cover is too expensive and walks away.
"There are a number of brokers that do their job really well, however, many do not. Yes, the onus is on insurers to do most of the work, but advisers have to do some legwork as well," he argues.
However, despite what Humphreys says, most of the respondents to the survey still think cheaper premiums would encourage employers to take up group PMI. In second place came more information on how important PMI is, with a faltering NHS cited as the third biggest reason why employers would take out PMI. Tightened employment laws, like age discrimination legislation are also thought to help spur more employers to look towards the group PMI market.
Overall, the majority of the people questioned would like to see more product development in this sector, with one respondent saying there should be more focus on prevention of illness rather than absence management. Luckily, it seems some providers are responding to this and new products are expected to hit the market next year. Howard Hughes, head of marketing at BCWA, says: "The PMI industry is undergoing a period of exciting product development and, following the successful launch of personal health in the individual market this year, we are reviewing our company portfolio of products for 2007."
In total though, the research reveals that most brokers are happy with the current propositions, but would like to see tools currently available to protection advisers, such as claims ratios and quote comparison tables, better developed. With more portals focusing on PMI, hopefully this will happen in the not-too-distant future.
