Fitting the bill

To succeed in a market which is becoming ever more competitive, private medical insurance (PMI) products must be innovative, transparent, and above all flexible.

They must offer flexibility to intermediaries and to their clients ' individual and corporate ' so both can be sure they are getting the best possible product to meet their needs.

On top of this the service provided by PMI providers must be as flexible as their products, so that when customers' needs change they can get the advice they need to help them change their PMI cover appropriately.

Some people will want PMI to do everything for them and will be able to afford to pay for a top-of-the-range policy that takes care of most aspects of their healthcare.

But what about those who still want the reassurance of comprehensive cover, providing both outpatient and inpatient treatment, but don't have such deep pockets?

The answer is to look for comprehensive policies that cut the cost of premiums in other ways ' and thanks to the flexibility of the market and a number of recent innovations there is now quite a choice.

Choosing policies with specific limited hospital lists is one option. Some products use restricted lists of private hospitals to contain costs and therefore keep premiums lower, and as long as customers are happy with the hospitals offered this can work well. Opting for a policy that only uses NHS pay beds will make it even more affordable.

Policies are also available which give customers a choice of private or |NHS treatment at the point of claim. If their circumstances mean they are happy to use the NHS they get cashback.

Some products keep premiums down by providing private treatment if the NHS waiting list is longer than a certain period. Again, for this to be suitable, the customer needs to be happy to use the NHS. However, the key driver for people buying PMI is speed of access to treatment, rather than hotel services. This has been backed up by the continued popularity of PMI products which work in tandem with the NHS.

Restricting cover

Recent entries to the PMI market include products which provide cover only for a limited list of conditions. Premiums are relatively low, but people buying this kind of policy need to be absolutely clear they will not be covered for any other illnesses they develop.

For customers with savings they are prepared to spend on healthcare, high-excess products could be suitable. These work well for those considering self-pay, offering significantly lower premiums in return for excesses as high as £5,000, but still giving customers the comfort of knowing that if they need treatment costing more than this, they are covered.

There is a view that people should forget the insurance element altogether, and save and invest the money they would have spent on PMI premiums in case they ever need treatment ' but this advice gives rise to a cautionary tale. Most insurers can provide case studies of customers who have made successful claims costing tens of thousands of pounds ' not uncommon with today's sophisticated and expensive treatments and drugs -' within a few months or even weeks of buying a policy. Few people have made provision of that level, and even if they had the most expensive PMI on the market, customers claiming early in the life of their policy would not be able to make much of a contribution to the bill simply by saving their premiums.

Prospective PMI customers with some spare cash might also be happy with a budget PMI option which excludes most outpatient treatment, so they would have to pay for initial specialist consultations. But if they are prepared for this, and it brings the premiums within their price range, it is worth considering.

All these approaches to PMI demonstrate the industry has gone a long way to offer broader choice. They also mean people don't have to lose out on cover altogether if their circumstances change.

What would happen, for example, to a person who reaches retirement age and finds they can no longer afford their PMI premiums? Or to those who have been covered by their company scheme and want to continue with PMI, but are shocked when they find out how much comparable cover will cost them as an individual?

Knowledge is key

In most cases there will be a cheaper option, and it is up to providers and intermediaries to ensure customers know as much as possible about what is available, so they can make an informed and appropriate choice.

As far as the corporate market is concerned, businesses are becoming more aware of the advantages of providing PMI for their workforce and are looking for flexible products which allow them to pick and choose the aspects of cover they want to provide for their staff.

Innovation is just as essential in the corporate market, at a time when employers are increasingly keen to control their sickness absence levels, and offer attractive benefits to support staff recruitment.

PMI cuts out long waits for treatment so people can get back to work more quickly, benefiting both employer and employee. Clearly, there is a large market for corporate customers who can appreciate the very real benefits that company schemes can bring.

An estimated two million people a year suffer illness as a result of their job, costing British industry an estimated 197 million working days and £11bn, according to information from the Confederation of British Industry.

Against this background, PMI for companies has a three-fold benefit ' helping companies to attract and retain staff, keeping their work-force healthy, thereby keeping their workforce working.

Again, flexibility is the key and in developing new service packages it is important the PMI industry recognises the need to offer companies a tailored option which exactly meets their individual needs. This means they can avoid off-the-shelf packages which might include unnecessary services and additional costs.

One of the most significant trends within the group PMI market over the next couple of years will be the development of increasingly flexible products aimed at smaller groups.

Providers will be offering more modular products, allowing employers to buy a core product and service and then bolt on whichever additional benefits suit their particular company.

Adapting to life

Of course there is another aspect to the flexibility of PMI beyond the adaptability of the products. That is the flexibility it gives the customer to plan the treatment they need around their life, instead of having to plan their life around the treatment, as they do when relying on the NHS.

How many people have received a long-awaited hospital appointment only to find it clashes with a holiday booked months ago, or with an important business or family commitment? The choice then is either to cancel the commitment and face the financial, professional or emotional cost, or to ask for a new hospital date and face another long and anxious wait, often in discomfort.

The benefit of PMI and the quick and planned access it provides to treatment is felt both by the individuals, and by companies who provide company schemes for their staff. Workers return to their jobs more quickly; recovery is often quicker if treatment is speedy rather than delayed, allowing the condition to deteriorate; and it is much easier for employers to plan for cover where necessary.

Promises have been made by the Government about improved NHS performance and shorter waiting lists, but it is going to take time to prove their aims can be achieved and that people can rely on quick access to high quality treatment when they need it.

PMI enables people to choose where and when they receive their treatment, and the more flexible the industry can make the products, the more attractive they are likely to be.

Carolyn Derrington is head of business development at Norwich Union Healthcare