Wider product choice and a more customer-focused approach is needed to stop the steady decline of sales in the individual private medical insurance (PMI) market, writes Angela Faherty
The individual private medical insurance (PMI) market has seen a slight but steady decline in recent years, and the last 12 months have been no exception. Faced with an almost impenetrable market, insurers are finding it increasingly difficult to attract new business in the sector. Recent figures from analyst Laing & Buisson show the individual market fell by 2.2% in 2001, signifying the continued struggle faced by those involved in the individual PMI market.
Despite these figures, insurers insist that overall PMI sales have been growing and the fallout in individual PMI is relatively slight. Opinion within the industry illustrates the market is static, but will continue to see growth, particularly in the corporate sector. However, providers admit there is most definitely a call for innovation and product development in order to address falling sales.
The downturn in individual PMI business and the increase in corporate PMI sales suggest consumers could be switching their personal plans for the group PMI policies being offered by their employers. Many insurers believe this to be the case and are adamant the individual PMI market has suffered as a result.
Fiona Harris, head of actuarial and risk management of personal lines at BUPA, explains: 'The decline in personal private medical insurance sales has been misunderstood. There has been a resurgence in corporate policies and as a result, there has been movement from one sector to the other. Many people are changing the type of policy they have by moving from a personal plan to one offered by their employer.'
However, Anne Dougan, marketing controller at Cigna Healthcare, is reticent to attribute the decreasing number of individual PMI subscriptions to increasing group sales. 'There have been many comments made about consumers dropping their individual plans because they have access to cover in the workplace. There has not, however, been any evidence to support this. The corporate market is growing, but there is no concrete proof that the two are linked. The main contributing factor to the decline, in my opinion, is cost, and this needs to be addressed.'
Dougan says the market has seen some developments towards premium reductions, but further innovation is still needed. The introduction of high excess options and the growth in the self-pay market have addressed the cost issue to some degree, and Dougan believes this is a step in the right direction: 'The concern people have with PMI is the value they are getting for their money. To address this, we are moving more towards personalised products that are tailor made to suit each individual's needs. Premiums are less, but so is the level of cover.'
Tailoring products by offering menu-based options and giving the products a more personal feel is becoming more prevalent in the market. Western Provident Association (WPA) also believes a more individual, customer-focused approach needs to be taken. The provider thinks tailoring products to suit the pockets of consumers will make individual PMI a more affordable and attractive option for many people.
WPA launched its Flexible Health product in May, offering the core elements of standard cover such as inpatient, day-patient, MRI scans and cancer treatment. The plan can be further enhanced by selecting a range of additional options to suit the individual needs of the customer. It also offers a shared responsibility option that allows consumers to share the cost of healthcare with the PMI provider.
Charlie MacEwan, head of communications at WPA, says offering customers choice is the key to market growth. 'The menu-driven option lets customers have what they want. Society is changing and people are more informed about what they need and why they need it. It is an ideal solution for those short of disposable income, but who still want to get individual private medical insurance,' he says.
There are others, however, who feel menu-based policies are not the answer. One particular concern is it could lead to consumers relying too heavily on one option, which may turn out to be worthless without another element of cover. Another is customers will want the core levels of cover, and end up with a standard product.
Iain McMillan, head of sales and marketing at Standard Life Healthcare, explains: 'Tailoring products with menu-driven features seems a good idea, but in reality, people want in-patient and out-patient cover, and once these options have been included, it's more or less a standard package anyway.'
McMillan believes the self-pay option is the way forward, although he adds the concept is still relatively new to the industry.
'There is room for the self-pay proposition to become more sophisticated in terms of development,' he says. 'Cost is the issue in individual private medical insurance, and for those at the older end of the market, it can prove expensive. But if they have a lump sum in the bank, they can self-fund those smaller operations should the need arise.'
The general feeling within the market is consumers need to be given greater choice when offered individual PMI. Dougan believes that opening up further channels of communication and offering a greater level of access to information on the service will help to boost sales. Cigna, she explains, has launched an online PMI application form within the last six months and the level of interest shows the product is still in demand.
'For all those using the quote facility, many may not necessarily fill in the online form. What we do find however, is the web is increasingly used to get information about the product before consumers call us to gather more information or to query something they do not understand,' she says.
With a growing number of financial services companies currently expressing an interest in launching PMI products, consumers' access to PMI information could be set to increase.
Dougan feels this is a crucial element in growing the market. She believes retail outlets and financial services companies distributing healthcare products will better inform consumers about PMI, which in turn will lead to greater growth within the individual sector.
Although providers are looking to grow their many are placing greater emphasis on maintaining their existing customer base through product development. Howard Hughes, sales and marketing manager at BCWA Healthcare, says the company has no plans to introduce a new PMI proposition, as it will be focusing on reviewing its existing portfolio. 'With growth being slow in the individual private medical insurance market, holding on to our current membership base is key. There will be no new products, but we are reviewing our Vital product with the aim to launch in the early part of 2003,' he says.
Similarly, other providers such as Norwich Union Healthcare (NUH), BUPA and Standard Life Healthcare do not have plans to launch new initiatives into the market. The focus is on reviewing the existing product portfolio, and any developments will be extensions or derivatives of those.
Tim Baker, commercial director of NUH, says the company hopes to write more individual business this year and has plans to release developments on its existing range later this year.
Despite the dip in subscribers, the individual PMI market has not suffered greatly in the last 12 months. There has not been a huge fallout of subscribers, but neither has there been a surge of new business or any substantial growth. Insurers have acknowledged the need for greater choice and lower premiums and are looking at the many ways in which to address this.
Self-pay options, menu driven products and a higher level of customer focus are high on the agenda for many providers, who hope to develop a product that will bring overdue growth to the stagnant market.
