Finding the right PMI policy for clients reaching retirement age can be difficult. Hazel Gregory answers some frequently asked questions
Are insurers meeting the needs of the over 50 age group with current product offerings?
With the exception of one insurer, it would be fair to say that the remainder of the private medical insurance (PMI) industry does not actively woo the over 50s.
Marketing literature may lead you to believe insurers cater for this age group, as you will find photographs of older couples and individuals placed within their promotional material. However, closer inspection will reveal that the policy is intended to cover all ages with no specific benefits or features for this age group.
Many people in this band find their policies have benefits which they are never going to use. Pregnancy complications, maternity cash grant and parental accommodation are a few that spring to mind. Even if we look to menu style policies these ancillary benefits tend to be lumped together in the same section.
What market initiatives have been launched with older policyholders in mind?
The reality is that since the removal of tax relief by the Government some years ago, there has been no move within the industry to offer products specifically for the over 50s. In fact, there is a distinct absence within the market of products for this age group. Exeter Friendly Society continues to be at the forefront with its family of healthcare products that do not impose age-related premium increases.
Although age at entry policies are not unique to Exeter FS, its maximum age on joining is set at 79, which is wider than its competitors offering this feature. As a consequence it captures the over 65 market too.
Most insurers operate year on year, or impose five-year age-related premium increases to which they add an annual inflation hike. With the passing of time the combination of the two eventually takes its toll on their clients as the burden of these hikes become too great for them to sustain.
All too often consumers, particularly low claimers, who have had their PMI policy for 20 plus years, complain that their premiums have risen beyond affordability.
Are there any other PMI products designed to help cut costs for clients in the over 50 age group?
Over the years the industry has justified substantial hikes in premiums by using the old chestnut 'the older you get the more likely you are to claim'. Although we accept this argument in principle, this philosophy is responsible for creating a divide.
This divide is between those who are not claiming – and therefore give up their health insurance as they think they are paying too large a contribution for those that do – against those that claim frequently.
For policyholders who do often claim, their premium represents very good value to them so they stay put. By maintaining this principle the insurer will always be left with the high-risk group, therefore driving premiums higher and higher. This principle applies to all age groups, but the drop-out ratio from PMI increases once the insured age passes 50.
Both WPA and Exeter FS have, within the last few years, launched menu style policies with their own unique 'shared responsibility' features. Exeter FS also has the added benefit of the age at entry feature.
The shared responsibility concept lends itself very well to the older age group. The ability to select levels of cover and co-payment allows the consumer to influence their premium.
What kinds of people in this age group tend to take out PMI cover?
The over 50 consumers of PMI cannot be typecast. They come from all walks of life – much the same as with all other age groups. They do though all share the same common element – the ability to fund their PMI policy.
The main motivators for taking out PMI include fast access to medical professionals and the availability of the very latest in high-tech diagnostics, together with choice of consultant, hospital and flexibility with dates and times.
Another driver is the public perception of the NHS with its adverse publicity constantly in the media.
What do older clients generally look for in a PMI policy?
The over 50 group tends to have a mindset about what a PMI policy should include. This is because policyholders grew up with standardised products that typically included inpatient, day patient, outpatient and ancillary benefits – all of which carried few limitations.
In general, older clients have little idea of what they should be looking for, or indeed what options are available to them outside of the traditional, comprehensive PMI policy.
Is there anything insurers could be doing that could help make plans more cost effective?
Insurers need to slim down the number of products they have on offer in favour of two or three policies with flexible benefits and features. Many insurers run with a range of PMI products, often with minor nuances in benefit and features creating mountains of confusing marketing literature.
By introducing well explained, menu style policies, the insurer would save huge amounts of money on expensive product literature. More importantly it would simplify the sales process.
Menu style policies enable the consumer to select from a range of benefits that they perceive they need, rather than choosing from a plethora of standard policies that often include benefits they know they will never use.
The psychology behind this is important. Because the consumer is actively involved in selecting benefits and features that suit their needs and their pocket, they are more likely to be satisfied with their purchase
Products that have flexible benefits enable the insurers to be more creative and move away from the old model designed to fit all. By offering a range of ancillary and added-value benefits and features, insurers will be able to effectively target specific age groups without the need for multi-products as is the case now. More added value benefits need to be incorporated to reward those with a healthy lifestyle, non-smokers and those with a low claims history.
The current year on year or five-year age increments need to be replaced with a loyalty bonus mechanism to enable the older age group to retain their PMI policies – unless insurers want this age group to fall out of cover.
The age at entry concept has attracted a cynical view among market leaders, but insurers that have adopted this mechanism report that their retention of low risk business is much higher in the older age group.
It's not just product design that needs to be looked at, but also promotional material including flyers and advertisements. The marketing message needs to be clear so that the consumer does not feel let down.
Hazel Gregory is managing director of Medical Insurance Services and secretary to the Association of Medical Insurance Intermediaries
