Medical insurance is simplicity itself - or so mathematician, physician and managing director of WPA Protocol Adrian Humphreys tells Angela Faherty
With a background in physics and mathematics, it may seem strange that Adrian Humphreys ended up managing director of WPA Protocol, the wholly-owned subsidiary of private healthcare firm WPA.
Having spent his early career in management consultancy, he joined WPA to head its small corporate business and oversee approximately 100 members of staff in 1998.
Straightforward
"I joined knowing nothing about medical insurance and everybody said it was terribly difficult," he says. "But then I realised that private medical insurance (PMI) is actually very simple. We take money off people and make a promise to them that if they are ill, we will pay for their treatment. And if they are ill, that is what we do. It is not complex. It's not hedge funds or split capital trusts, this is straightforward stuff."
Six months after securing the post, Humphreys was given control of the entire corporate side of the business and has never looked back. During his time at WPA, with the help of a dedicated team, he has spearheaded a number of initiatives, including shortening the firm's processing times.
"If a customer writes to you on a Monday and you do not get something back to them by the Friday, they will ring you up and this costs money. Although the service standards were already tight, we worked to change the response time from seven days to two days," he says.
Today, customer service remains at the heart of WPA's ethos. In an age where call centres are seen as 21st century sweat shops, Humphreys believes getting the balance right can be hard.
He says: "We genuinely try in the financial services industry to run people as if they are machines. This is a massive mistake. Generally, if you get hold of a person in a call centre and ask a question that is slightly off piste, they don't know what to do."
Instead, Humphreys says, making call centre staff responsible for the decisions they make means they become part of the organisation. This, he says, is central to WPA's beliefs.
"The most important thing we say to new recruits is that whatever you do, take the risk and make the decision. That is the most powerful thing you can say to someone. The second thing we do is tell them, if you make a mistake and correct it yourself, you will never make it again and you will learn from it.
"The difference between management and leadership is enormous. There are obviously times when it goes wrong, but we do try."
Having successfully changed some internal processes, Humphreys began to look at how WPA could reap further rewards in the healthcare market. Spotting an opportunity in corporate healthcare trusts (CHTs) in 2002, he was appointed chief executive of WPA Protocol, which provides healthcare administration services to firms with CHTs.
Starting on a trial basis, the firm administered a couple of trusts to get established before it began to bid for and set up CHTs itself. Since then, WPA Protocol has gone from strength to strength and last year generated, on a like-for-like insurance basis, an additional premium income of approximately £10m, according to the firm's 2005 report and accounts.
"We have been amazed at how effective it has been. Its success has blown us away.
"Healthcare trusts are the way forward. If you have more than 500 employees I think you're barking mad if you don't move to a trust. But if someone wants to be insured then obviously we would write it," he adds.
Clearly, business is doing well and it is likely to continue in this vein. The firm has just introduced a new administration system, which is 100% web based. This again has improved response times from 10% being paid automatically to well over 60%.
As well as overhauling administration systems, the introduction of Financial Services Authority (FSA) regulation prompted WPA to slash the number of IFAs and brokers it sold business through from 9,000 to around 60. Previously, the firm had almost three equal ways of selling business; direct, through IFAs or brokers and through a national sales force of about 100. But this is no longer the case.
"Things have changed massively under the FSA. Regulation came marching along and it put the writing on the wall. We saw there were loads of brokers out there who did not understand PMI. They may be brilliant at selling pensions and mortgages, but they are running themselves into an enormous danger. What they are doing is selling a product that is deemed high-risk by the FSA. The regulator is the best thing that has happened. What it has done is say that you cannot be an amateur in this industry any more. For example, if you don't know what a moratorium policy is then you shouldn't be selling private medical insurance – either learn or give it to a specialist."
Regulation has also created a fertile environment for the role of the introducer, something Humphreys welcomes wholeheartedly in light of the firm's decision to transform its direct sales force and set up a number of franchises across the UK. And with a local WPA office in every market town in the land, the aim is for WPA's appointed representatives to work with local brokers, who can introduce them to new business.
Optimistic
With this in mind, it is little wonder Humphreys remains optimistic about the future. He admits there are challenges ahead, however, but says these are par for the course.
"The struggles faced by the NHS and ourselves as private medical insurers are identical. Basically, it's the march of medical technology which doesn't necessarily mean costs go down – in fact, they go up. The ageing population and the quality of consumer demand is higher and, as a result, costs are rising. Cancer is also a big threat – it is the one everyone fears. There are some oncologists who are now saying that cancer is no longer the dread killer disease that it once was, but has become a chronic disease that can be treated. As a health insurer these struggles are immense," he says.
Humphreys believes the answer to controlling these costs lies in smarter underwriting. "Currently there is a schism in the way insurers underwrite. There are those that are going down the route of assurance by cutting benefits, but I don't think that has legs. As an industry we have to recognise that we need to make a decision.
"Do we keep premiums down and offer full cover, which is what we are supposed to do, or do we put premiums up and cut benefits but give a full panoply to absolutely everyone, but then accept claims ratios which are incredibly high? We need to be cuter about underwriting," he says.
So, with such a dichotomy in the sector, what does the future hold for the PMI market? Resurrection, says Humphreys. "The NHS is gradually crumbling and is likely to go the same way as dentists.
"But far from being dead, PMI will do well on the back of it, but it won't be an easy ride."
