Kirstie Redford talks to Rod Bramston about WPA's attempts to innovate the medical insurance market
When you think of private medical insurer WPA, the first words that may spring to mind are 'shared responsibility'. Riding the crest of the high excess wave that has swelled in the individual market, WPA has seen great success with its Flexible Health product, which uses its now famous shared responsibility pricing.
One step ahead
The plan claims to reduce premiums by 60% by sharing the cost of all treatment up to a personal limit, when full cover kicks in. Unlike traditional excess products this means policyholders never have to foot the whole bill for treatment, but are encouraged to claim less as no treatment is free.
Steering the individual business at WPA is Rod Bramston, director of its private client division. When you talk to Bramston it is clear he really believes shared responsibility is the way forward for healthcare funding. Perhaps this is because he has seen it work on a wider scale. Australian-born, he has lived in different countries where co-payment models are established and working well.
As Bramston says, it is not just WPA that endorses this funding strategy: "This element of co-payment, which can be seen in South Africa, Australia, America and France, has been found to be the one way of controlling medical expenses and providing customers with very good quality care."
Having worked 11 years in the pharmaceutical industry, Bramston has a good understanding of medical inflation and with seven years in insurance he knows the importance of being one step ahead to keep cover affordable."Health insurance is about financing one's healthcare and looking at the financial models that exist out there – rather than what everyone's been doing, which is giving people full cover medical insurance," he says.
This new approach looks like it could be working, according to the latest sales figures for WPA's Flexible Health scheme. It accounts for an astounding 95% of its new individual business. Its success has led the insurer to offer to move policyholders on traditional comprehensive plans to shared responsibility to reap the cost benefits. However, it will continue to offer both types of plan.
When it comes to new ideas, the proof of the pudding can often be seen if other insurers decide to follow. So according to Bramston it was no surprise when a similar plan was launched.
Curbing costs
"Obviously Exeter Friendly Society has launched a plan that is building on the elements of shared responsibility and I'm sure other insurers will be looking at it because of the success we're having with it," he notes.
As shared responsibility means policyholders pay a percentage of even the smallest claims, it could be presumed that the insurer was introducing the scheme to target younger, healthier clients. It would seem natural for older people, who may be more likely to claim, to shy away. However according to Bramston, business is coming from all age groups and the plan is in no danger of becoming exclusive to a healthier risk pool of clients.
"This isn't showing from our statistics," he says, "it's very much across the board. With health insurance the major market is aged between 35 and 65. A lot of older people see their premiums going up with age and medical inflation and they are the ones that are saying, 'this is getting too expensive, do I give up insurance completely or do I look at the approach of shared responsibility?'"
The concept of shared responsibility makes sense, in that it keeps claims down to curb costs. Although Bramston would like to see a co-payment strategy in the NHS, he isn't confident that everyone would embrace it. It is easy for policyholders to see the cost benefits when they are used to paying high premiums, but not so easy for the general public to foresee service benefits when they are used to free care.
"If future healthcare is free once you have paid your tax as it is in the NHS now, you are going to have an unlimited demand, as you have now. Therefore you are not going to improve the system. We feel strongly that by making the customer a consumer, they then seek best value and quality, and we are better able to work together.
"In my opinion this solution is a very good way of controlling waiting lists, but I'm not sure whether the whole population would go down that route. I think it would take some time," he says.
Away from shared responsibility, WPA has also carved a niche in the medical insurance market for targeting schemes at specific client groups. There is its Flexible Health Freelance scheme aimed at the self-employed, Enterprise Smart-Start for start-up businesses and the more recently launched Professional Health aimed at those in professional occupations. Bramston says this targeted marketing is proving very effective in getting new business.
"The normal way of promoting health insurance is to have one plan that they try to target to the overall general market. But we don't look at it like that. We have specific products and pricing according to different risks. We have extremely good technology at WPA to identify specific sectors and how likely they are to claim, which then allows us to set the premium accordingly, giving them much better terms," he says.
Transparency
Last month, WPA held a press conference to call for insurers to be more transparent about service levels. This is an area it certainly prides itself on and believes that consumers have the right to access information about past service performance before they buy. "There is a huge responsibility to treat our customers fairly and that they understand not only their premiums, but that we deliver," says Bramston.
"Increasing regulation is taking a lot of the decision-making away from individuals and putting the onus back on the industry. But you can go too far down that route – the consumer has to make a choice. From a regulatory perspective, it is very important to make sure customers are getting the right information and that the industry is working in the interests of consumers. Many companies out there are looking at the quick sale and not looking at the long-term life of the customer and how to keep them."
In light of this, WPA has promised to publish its service results on its website and in its sales material. If the rest of the market follows suit, it could prove interesting reading. As for the future, Bramston says intermediaries, through which 35% of WPA's sales are conducted, will play a key part in the insurer's strategy.
"The burden of regulation means there's going to be substantial change out there, but I still believe there is a very strong need for the presence of the broker giving independent advice. Intermediaries provide quite a high percentage of sales at WPA and we will continue to work very closely with them," he says.
