The group PMI market has been a little flat of late. So why not try to dazzle it? That's the consensus view of some providers, as Nicola Culley reports.
Employers have been demanding more for their money when it comes to group private medical insurance (PMI). The onus has fallen on the providers to bring a bit of sparkle to the robust yet flat market; and a handful have served up something to speak of. But by nature, PMI is expensive and brokers have been beavering away to manage client expectations.
A significant market movement this year has been the increasing credibility of WPA’s corporate deductible concept. Aviva offered its own take on the matter with a corporate excess product in April, and Simplyhealth has confirmed it is in serious talks to develop similar.
WPA was criticised given that the scheme had only received regional clearance on tax matters rather than national ones. And some questioned what the implications would be for P11D forms.
The deductible product is aimed at 200 to 400-member schemes. It worked on the idea that by 100 lives scheme volatility reduced, and for larger schemes claim numbers were roughly known. WPA’s product offered partial insurance, where the known amount would be uninsured, held separately in a bank account and free from insurance premium tax.
Rachel Riley, head of new business at WPA, said: “I am really pleased that two more providers have come to the market. It gives the concept credibility and us more competition.”
She explained that just like any other private medical scheme, companies would need to seek approval from the local tax office. “The rumblings are around P11D because you have to go to your local office to get approval. But we have had a number go through absolutely fine,” Riley said.
“Everyone is crying out for innovation in the market and asking how we can do it better and this is a good example. This is not going in through the back door. This is completely above board.”
Riley went so far as to pose the question ‘Is fully insured a mis-sell for larger companies?’ She said there seemed no reason to offer fully insured large schemes any more. Aviva has similar thoughts. Its corporate excess product, launched in April, is similar, but instead holds the uninsured amount in trust.
INTEREST IN INNOVATION
Nick Reynolds, head of PMI at Aviva, said: “I would be surprised if other providers do not look at this very seriously because in the current economic climate, employers are looking for more innovative ways to maintain benefits and save on cost. “We have had interest from several corporates. I do see it as a growing alternative in the market.”
In other areas, cash plans are still in fashion. According to provider Simplyhealth, cash plan sales were increasing significantly with advisers selling as a cost-effective alternative to PMI.
But the story for cash plans does not stop there. From hot on the agenda to hot potato, dark clouds have been forming over increasing use of the products to insure excess on traditional corporate excess policies.
The growing sentiment is that taking both out with the same provider warps underwriting risk. Simplyhealth is an example of a provider offering both. Howard Hughes, its head of employer marketing, said: “Our view is that if clients want to buy excesses, then they will. And if they want to use a cash plan in combination, then they will.
“Affordability is a big issue at the moment, so insurers will have to keep an eye on this.” The driver of this cash plan-excess combo has been affordability.
This has always been an issue for the PMI market, but it is a characteristic compounded by the economic backdrop, which has put even more pressure on the market to come up with something better.
Hughes said it was important insurers were adding value to group PMI products as well as low cost, but added that in its favour, the market was hugely resilient.
“Growth may stop as it has now, but it is holding its own and remaining flat because it is very difficult to opt out once employers already have it in place,” he explained.
“As companies downsize, we may see some leakage as PMI members are lost. But it is extremely rare to see employers remove group PMI.” And the incoming auto enrolment workplace saving initiative will have a positive influence on the market, Hughes added. Starting from October this year, employers will have to automatically enrol workers into the company pension scheme.
Hughes said: “There is no doubt that auto enrolment will increase SME overall cost, but it can be seen as a positive for the market. It will change the way companies think about it. But the economy may also hold it back, as it is often seen as a luxury add-on.”
CASH PLAN CAMARADERIE
But what are brokers thinking about the group PMI market? Mike Izzard, chief executive of Premier Choice Group, said some cash plan providers had spotted the gap in the market, whereby they can be used in combination with an excess plan.
He said: “You can make discounts of about 40%, which is quite chunky. A lot of brokers have been advocating it – and it’s fine as long as it is done properly. We try not to warp the actuarial factors by taking the cash plan and the excess policy out with the same provider. That to me is a risk for providers to be offering both.
“Brokers have to be very careful what they do. But it works both ways because providers should not be pushing for both to be taken out with them.
“There is nothing to stop it and we have been in a few meetings lately with providers where this is becoming a rising concern.”
Aside from cash plans, the main thrust of employer demands, Izzard reported, was keeping PMI plans going but for cheaper. “They want more maximum benefit for lower premiums. As brokers, we need to be managing their expectations,” he said.
Other developments have brought something new to the market. Westfield Health has been a notable player with its recently launched hospital treatment insurance.
The product has been seen as a middle ground between health cash plans and PMI.
It offers access to 1,300 surgical and medical procedures, criteria broadly being; any surgery requiring a general anaesthetic; any with local anaesthetic and an incision; and other specified procedures such as endoscopies. Cover starts from £1.24 per employee per week.
Paul Shires, executive director for sales and marketing at Westfield, said: “We see double-digit growth in PMI premiums because of medical inflation. It is just not affordable for the masses.”
With the new health bill and NHS reforms, there are already rumours of increasing waiting lists and some serious operations being cancelled. But the product only covers, by and large, routine surgery. It does not cover heart or cancer conditions.
Shires said: “This has not been created to encourage companies to downgrade from PMI. It is trying to create a new market.”
With the questionable sustainability of cash plan and excess combinations, a middle ground might just be what the group PMI market is after. And with corporate deductible making a firm footprint, the market is reporting movement.
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