Defaqto's star rating of private medical insurance products has excited controversy among many players in the sector. Ben Heffer explains the rating agency's case.
To say the private medical insurance (PMI) market is under pressure is an understatement. With a question mark over the future of the NHS and innovative new products from the private medical insurers, PMI should be a popular protection choice for consumers. However, affordability remains an issue and the resulting focus on price is not serving the industry or consumers well.
NHS reforms currently going through Parliament should be a driver for increased PMI sales regardless of the actual effect that such changes may have.
Sadly, with pressure on consumer spending and other insurance needs taking priority, the PMI market remains sluggish. The latest figures from Laing & Buisson show that penetration fell to 11.1% of the population at the beginning of 2011.
Most who have PMI are members of an employer scheme. As firms struggle during the economic downturn, some may stop this benefit or trade down to group cash plans. Competition for group business among the healthcare insurers remains fierce and getting new business instead of rebroking existing schemes is a challenge.
MOVING TO MODULAR
In the past year, we have seen PMI providers make a concerted move towards modular benefits, where customers can pick and choose the types and levels of cover within their policies.
This is a useful way of addressing affordability. But with insurers encouraging consumers to deal direct, there is a danger that they may select cover they don't need or, worse, de-select cover that they really should have.More than ever, people should consult a professional broker if they are in any way unclear about their choices.
Traditionally, PMI has been positioned as a luxury item for the better-off. This is unfortunate, as the product should really be about peace of mind. Typically, those who are ill want to know what is wrong as soon as possible and then, if treatment is necessary, be dealt with promptly.
PMI meets this need. Recently, providers have brought products to the market that cover either diagnosis or treatment. This keeps the cost to the consumer down by addressing only specific needs.
It is against this background and in response to these challenges that Defaqto has launched its new star rating for PMI. This aims to help people base their product selection decisions on the features and benefits that policies provide, not just how much they cost.
