For IFAs trying to sell private medical insurance, success can often be a case of dodging common pitfalls and jumping over hurdles for the client, says Debbie Kleiner-Gaines
Most people agree that private medical insurance (PMI) is complex. There are incalculable pitfalls if someone does not know their stuff inside out. There are a number of specialist medical insurance intermediaries in the UK, but, still a large proportion of medical insurance business is being placed by IFAs.
There are four routes for IFAs in dealing with PMI:
n Outsource to a specialist broker
n Refer the client to the insurance company direct
n Deal with the client in the specialist in-house PMI department
n Advise the client on PMI, although with a limited panel and perhaps little knowledge
Some financial advisers choose to outsource their PMI advice to specialists if they feel they do not have the expertise in-house. There are, of course, a number of IFAs that take medical insurance seriously and have specialist departments within their business. However, many smaller IFAs will continue to advise on PMI although this may not be an area of expertise. Others refer their clients direct to certain insurers if asked. This is a missed opportunity not only to earn commission (either direct or as an introducer fee from a specialist) but also to keep all their clients needs under one umbrella. Many financial advisers will admit to only recommending one PMI product to their clients, often the household name, Bupa.
Any independent adviser should know the market well enough to be able to advise from a full range of products. But many just do not have time to keep up-to-date on the changes in the PMI sector. However, this is not beneficial for their clients. "Winging it" cannot be condoned by any stretch of the imagination, but there are some pitfalls they can avoid if they want to keep PMI advice in-house.
Many of those pitfalls link back to the issue of "transparency" of many products in the health insurance market. There is much more to PMI cover than can be explained in the brochures. Any good adviser will conduct a thorough annual review to ensure their clients have the best plan for their needs. If this is not happening, their client could start to feel neglected. With so many new products entering the market, especially within the past two years, clients really could be benefiting from a full review. When conducting a PMI review, there are three main factors that may persuade IFAs to switch their clients to a new provider: price, service and underwriting exclusion.
An IFA's aim may be to lower their clients premiums while maintaining the same level of cover. If they really want to work hard for their client, they should not take the insurers first price. They should, instead, go back to them and negotiate. But, they should be careful to find out if the price obtained includes a first-year discount, no claims discount or is a fixed price for two years that will then inflate dramatically in year three. IFAs need to make a comparison about how their client's existing scheme is likely to increase in a year against the new product they are recommending.
So, they have found a better price, they think the cover is better but what other factors may they want to consider?
Claims and service
IFAs may switch a client from one insurer to another as they have had a bad claims experience, but, how can they be confident that this will not ensue with their new insurer? They will want to know the following:
n How are claims handled?
n How quickly are claims dealt with from the initial phone call made by the client?
n Where is the claims department based?
n Is the bill settled directly with the hospital with no client involvement?
n Do they have specialist teams to handle claims? (for example, cancer teams)
n Will the client be dealt with by a named contact?
This is where the greatest errors can be made. For example, advisers may be switching their clients from Axa PPP healthcare to Norwich Union Healthcare. The price is better, the cover looks equal but has the IFA explained to their client that Norwich Union will only pay specialist fees that fall within their specialist fee guidelines? This is just one example of where IFAs may trip themselves up if they do not point this out to their client.
There are some excellent resources, such as, Insurance Resource at http://www.insuranceresource.co.uk. However, even with the help of this website, IFAs will still need to do their own homework as the site does not cover everything. Alternatively, advisers can prepare their own comparison based on the information given to them by insurers. With constant updates and changes, this is a time-consuming option. The main element to check will be "in and out-patient monetary limits" as well as hospital lists. The following list outlines additional questions that IFAs will need to know the answers to before they can be confident to switch their clients.
n Are there any limits on cancer?
n When does the insurer class cancer as chronic rather than acute and so stop paying for treatment?
n What hospitals are covered?
n Are there any and, if so, what are the limits in relation to specialist fee guidelines?
Many of these questions are not answered in insurers' brochures. Most advisers will use their own personal experience to answer these questions. But surely there is an easy way to get these questions answered and be confident that these issues will not present problems?
If they feel the answers are not explicit in the brochures, advisers should email their intermediary representative and get a written response to these questions. That way, there is written proof of the answers and comeback if anything goes wrong.
Another factor to consider for best advice at the review stage is underwriting. IFAs will be looking for continued personal medical exclusions and underwriting terms at a review, but, have they considered medical history disregarded? This could be of real benefit to the client. Perhaps, since their last review, they took on a new employee with ongoing medical problems. Offering them medical history disregarded means that particular employees can get immediate treatment for pre-existing conditions. Do not forget the option to mix and match underwriting and save the client money. Find out which employees can be fully medically underwritten - this would only really work for a small scheme under 20 - as more than this, it is hard to keep track on employees medical conditions.
The clients' situation may have changed and a plan that includes overseas cover and perhaps dental treatment may be of interest.
Debbie Kleiner-Gaines is managing director at Best Health UK
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