Worldwide cover

Two years ago, the international private medical insurance (PMI) market surprised itself by remaining buoyant after the terrorist attacks of 11 September, and in the past 12 months it seems to have done it again. The war in Iraq seems to have had little effect on current sales of international PMI products.

Jonathan Earnshaw, business development director at insurer Expacare, which contracts much Middle East business, is upbeat.

He says: 'We were worried about our exposure in the Middle East as we do a lot of business there, especially in Dubai and Kuwait. But the war did not last long and there was no protracted build-up. There was no continued atmosphere of threat as there was in the Gulf War. We did not lose any business.'

Exeter Friendly Society, which, apart from Europe, has a considerable amount of business in Kenya and Malaysia, also reports no downturn due to world events.

'People are quite brave. We have found individuals are not deterred from emigrating abroad by world events,' says Neil Armitage, group marketing director at Exeter Friendly Society.

It is difficult to say how large the overall market actually is. There is little information on the expatriate market, as there is no equivalent to a Laing & Buisson survey in this sector. Information on business levels is generally company-specific.

One aspect of the industry that has continued over the past few years is the trend for expatriates to change to another, local policy once they are settled in the country. The propensity for doing this depends on the particular country and the policyholder.

Local competition

Sarah Jewell, a director at A La Carte Healthcare, says: 'We find it is primarily companies that will consider a change to a local provider. Once their staff are abroad, they will look at the price. We find that individuals are more staid and will tend to move around and take their contract with them. For us it is the brokers who are important ' it is their advice that affects what a client does in this situation. While there is obviously a mixture of experience within the broker community, on the whole they are knowledgeable and are selling the product well.'

However, Earnshaw cites Spain and Portugal as good examples of where local providers supply low-cost, effective coverage giving access to a range of hospitals.

'The British expatriate community is deserting British providers in droves and moving into local plans. Spanish hospitals are good and, where there is local provision offering effective, reliable insurance, the majority of people would buy locally because it is cheaper,' he says.

Armitage acknowledges this trend, which in contrast to A La Carte Healthcare, he sees mainly in the individual market. He believes it is partly due to individuals having not bought any PMI before, and being a little disgruntled at paying for their own healthcare. They therefore go for the cheapest policy they can find.

He says: 'You get what you pay for. We find, in Spain in particular, organisations do not stick to the selling rules as rigidly as we would. I would not name names, but mis-selling is rife and people only find out when they claim.

'Generally what happens is that there will be a bad experience with a domestic provider, or word gets around in the expatriate community and people flood back to trusted providers. Domestic providers can provide cheap cover, but also can give poor benefits, which are sometimes inappropriate for the client.'

Intermediaries in the UK will tend to deal with people before they actually leave the country and clients are often attracted to the security a well-known brand can give.

Hazel Gregory, director of Medical Insurance Services and secretary of the Association of Medical Insurance Intermediaries, says: 'People tend to be conservative when it comes to issues such as health matters abroad. The security of a known name is probably why we have not noticed a drift to local companies. In addition we do look at the whole market and if there is a better deal available, we can advise our clients accordingly ' although in general we would not like to change clients between insurers unless it is necessary.'

One issue Gregory feels has been outstanding for several years is chronic conditions.

'Before someone heads off to foreign shores, chronic conditions need to be looked at closely. This is an area brokers can make a difference in, advising on the various options open to the client. Corporate policies tend to mirror the domestic market in being slightly more lenient in interpretations, due to economies of sales. But there are products out there for individuals that will cover this issue,' she says.

Earnshaw points out that Expacare offers cover for pre-existing conditions on its individual policies, but says it is not always clear to clients if they would need it.

He says: 'The problem is still that it is not always easy to work out if you need to insure for these conditions. In Australia, for example, the state system is Medicare. If you are emigrating,and want to know what you are covered for with them, you cannot find out ' they will not tell you until the condition emerges. Around 38,000 people emigrate to Australia every year and I would imagine the majority has no relevant cover before they leave ' and the same would apply to the US.'

Exeter Friendly Society, like most insurers, will stabilise acute episodes of a chronic condition but will not cover a chronic condition in general.

Earnshaw believes the issue is really one of cash-flow management. He says: 'The insurance business is about assessing risk and with a chronic condition there is a degree of certainty of paying out. You may wish to pay for your own condition and only insure for acute episodes. Some of the Dutch and German insurers among others will cover this, but they load the price due to the certainty of claim.'

Quiet times

Not a great deal has happened in the international PMI market over the past 12 months. CIGNA International has a slice of the market in the US and is focusing on the UK and Europe at the moment; Allianz Worldwide Care and PPP AXA healthcare, according to Earnshaw, are sleeping giants. While BUPA International has been actively attempting to grow its foreign markets over the past year, Winterthur Life has left the market.

Earnshaw explains: 'It wanted to break into the small, corporate market in the UK ' which is probably one of the hardest to break into, selling through intermediaries ' and it did not sell much.'

Earnshaw believes there are some key markets that are going to become more attractive to providers, including the US individual market.

'It is the single biggest market in the world and it is not being addressed by anybody at the moment. I think a lot of large organisations are worried about general stability internationally. Operating internationally is seen as increasingly difficult to do, but ironically it is then that the market can be at its best,' he says.

'In the future the market is going to evolve through joint ventures, enabling companies to access key markets, rather than a change to products or the environment that they are sold in. Access to markets will be key and product innovation only takes a company so far.'

Jewell disagrees: 'I think it is a mixture of both product innovation and access to markets. Private medical insurance is a question of the overall package, and it is that package as a whole that will change. There are questions of covering psychiatric, AIDS, dental and many other things. How you put that package together is the factor that makes one product more attractive than another and that will relate to the premium as well.'

Armitage does not see the US as the way forward for Exeter either. He says: 'We would not want to enter the US market. The risks and liabilities over there are far too high, and are better understood by the domestic providers over there. Any trend has come from the consumer in that more are going abroad. This resulted in more intermediaries and other outlets for these products ' driven by demand.'

Gregory sums up the general mood of the market. 'To be honest over the past eight or nine years I have not seen a significant change. I anticipate things will continue to trundle along much the same, although insurers are beginning to look at Europe a little differently, giving that particular market a bit more emphasis,' she says.