With benefits for both firms and employees, Derek Findlayson outlines why SMEs should consider embracing private medical insurance and how advisers can best sell it to clients
In the UK, there are 3.7 million small to medium-sized enterprises (SME) that need advice on running their operations safely and efficiently. However, while they are all potential customers of insurance and financial services products, they have neither the inclination nor the resources to buy unless presented with a compelling argument.
So how can intermediaries and product providers build such a case for private medical insurance (PMI)?
While this may not be an easy task, it is certainly worth the effort because not only can this sector expand a broker's field of interest, it can also help defend their existing relationships from other competitors.
The question is, however, what is the appetite among the SME community for PMI? What hurdles must intermediaries and product providers overcome? And what positive steps can they take to develop this attractive sector?
SMEs are clearly not flocking outside IFAs' doors to buy PMI as many of them do not realise its benefits. The task is therefore to communicate these to them.
Group PMI
Group PMI can answer many of the needs of an SME, in particular as these organisations depend heavily on their staff. Firstly, they do not have large teams of people available to cover for absence. And secondly, in a relatively small team it is essential that morale remains high.
PMI enables people to choose, within reason, when and where they are going to receive treatment. It is therefore possible in many instances to co-ordinate the timing of absence to suit both the individual and the employer in ways that simply do not exist within the NHS.
Private medical treatment also generates valuable management information that helps a firm monitor and control staff absence. Put crudely, the employer knows exactly where and when treatment is being given and what the outcome should mean in terms of a return to work. Again, this quality of information is far superior and more reliable than when the State system is called into play.
In terms of morale, having group PMI in place demonstrates how much an employer values its staff members too. Employee benefit surveys consistently place PMI cover towards the top of their 'most desired' lists, along with a company car and a good employer-funded pension. It promotes a caring attitude, boosts loyalty and can serve as an effective recruitment weapon.
Communication
So what is the best way to get the message across? Clearly, sitting face to face with existing clients is the ideal selling scenario. But consideration may also be given to a more broadly targeted promotional campaign, either in the form of advertising or direct-mail activity underpinned by telesales and e-communication.
It is at this point that intermediaries should look to their product providers for suggestions and support. Insurers often have experience and expertise in mounting such campaigns, as well as the marketing resource to bring them into being. The combination of local contact and promotional capability is potentially a very potent one.
One of the objections often raised by SME owners is that group PMI is a big company product. In terms of cost, scope and purpose they say it is suited to organisations with large payrolls and deep pockets.
This can be countered by presenting a PMI solution that is tailored to the specifications of the SME client. Efforts can be made to ensure the marketing, structure and pricing of the policy, together with the attendant's risk management and claims services, address SME sensibilities and requirements.
Good news
The good news is that SMEs like advice. According to research undertaken in the SME market by NOP, those running such firms place great emphasis on independent expertise. They want maximum benefit for a minimum of hassle as well as an effective solution that does not ask too much of their time to arrange.
This is hardly surprising. SMEs are unlikely to have a full-time risk manager or insurance buyer. An intermediary is likely to be dealing with a director or even an owner who has numerous calls on their time and energy, so the quality of advice is going to be to the fore.
The most important raw statistic is that only 12% of the population have PMI cover. Yet if you believe the media, not far short of 100% of the population has concerns about the efficacy of the NHS. This is a huge gap for brokers to fill via corporate clients.
Many brokers and providers want to extend their involvement in SME business. This comes as no surprise as the commercial landscape of the UK has changed dramatically with the decline of manufacturing and the number and significance of large firms also declining. The gap is being filled by the burgeoning SME community.
SMEs value the independence, expertise and choice provided by brokers. They like building a relationship with a local professional. In general, they are not enamoured of direct selling, with its impersonal, one-size-fits-all approach.
There is a trend towards the sale of customer solutions rather than a clutch of isolated products. This echoes back to the earlier point about SMEs wanting a streamlined, straightforward, hassle-free answer to their needs.
Anyone who established an insurance brokerage today would not set out to satisfy only a proportion of the needs of potential clients. The aim would be to provide a total service solution embracing every requirement. Existing brokers need to measure themselves against this fact and then take steps to ensure their offer is complete.
Derek Findlayson is UK business
development manager at Groupama Insurances
