Home and away

One of the effects of consolidation and globalisation of the insurance market in recent years has been that domestic and international products have tended to become more alike. The private medical insurance (PMI) market is no exception. Healthcare providers in Europe, the US and the Far East have been quick to pick up on new and successful ideas from their sister companies in other parts of the world as well as from their competitors. This means products are changing faster than ever and they translate more easily from one country to another.

Brokers, like PMI providers, have to be quick-footed to deal with the pace of change, but for those who are up to speed, the rewards can be considerable. And due to the convergence of domestic and international PMI products, there is huge scope for knowledgeable UK brokers to expand into the international PMI arena.

Below are detailed some of the differences and similarities in key areas of the home and international markets.

Price

International PMI is more specialised than the home market, with the key target being top executives on overseas engagements. As yet international healthcare has not penetrated the ranks of middle management to anything like the extent achieved in UK PMI, although they remain a real target for most providers. This means the majority of the plans sold to expatriates are high-premium and high-benefit.

The group international market is still price-driven. Individual plans, on the other hand, place far more emphasis on service and added value. Senior international executives, unfamiliar with the healthcare system in their new country of residence, tend to be less concerned about cost and put the emphasis on ensuring they have the right protection in place for themselves and, where relevant, their families.

That said, the growing costs of medical insurance are a huge issue, both at home and overseas. To stabilise the runaway inflationary impact of full refund policies there is growing pressure for the domestic PMI market to introduce more self-pay elements to cover. Similar trends are also apparent in international PMI where the tide is turning against full-cover policies due to rocketing claims experience and, in particular, the huge administrative costs associated with smaller claims.

Products

As might be expected, product and cost go hand in hand. A great deal of imagination and effort in international PMI product development goes into the question of how to successfully introduce product features typically resisted by policyholders, namely greater co-insurance ' typically paying, for example, only 80% of any claim ' higher excesses and providing incentives to guarantee only genuine insurable risks.

Partnership arrangements are also popular and some insurers offer networks of hospitals and GP care to keep medical bills under control, often linked with hands-on service provision. When this works properly it results in the whole system flowing better ' keeping a lid on clinical costs, keeping premiums down, ensuring a regular flow of patients to chosen doctors' surgeries and hospitals and maintaining medical standards. Just as importantly it can also be extremely advantageous for clients, especially if an outpatient, direct billing facility is in place, freeing them from the whole payment process.

Flexibility is the other pillar of international PMI product design. More employees of multinational companies are working in roles which take them not just to one country but all over the world. A healthcare product, which provides choice from the outset or flexibility at renewal, can have enormous appeal to these mobile expatriates who need their cover to take into account distinct local variations.

Protection

The consequences of the growing pressure towards high excess policies are much the same at home and abroad. Apart from the desired effect of reducing or holding down the cost of premiums, excesses also help to focus the policyholder's mind on one of the most important roles of a PMI policy ' protecting the assets which could be at risk if a large claim comes along.

Small claims of £50 or £100 are not cost-effective for either insurance providers or their policyholders and a logical solution for most expatriates is to build in excesses into their policy for these small amounts. This will reduce the cost of premiums dramatically and focus attention of the true value and quality of the policy ' particularly in the area of larger claims of, for example, £5,000 or more.

In many developing countries, outpatient facilities for cancer patients are virtually non-existent and the suitable solution, whether it be evacuation or a personalised local care service, can run to enormous sums. Local medical costs for everyday ailments are, on the other hand, comparatively cheap and easily arranged. The logical solution would seem to be concentrating cover at the costly end of the scale.

However, this is not the way some policyholders think. Many still look for inclusive medical insurance, which focuses on the smaller claims. This can be a wasted cost-saving opportunity given the fact that, if smaller claims were taken out of the equation through higher excesses, the premium reductions can be significant.

Local vs global

Expatriates often have a choice between the policies local to specific countries and global plans that tend to cost more but provide higher benefits. The latter usually also offer the added advantage of continuous cover whenever the policyholder moves to another country.

Local plans may have their place, but no-one should consider a policy which does not include the following benefits:

• Global elective (non-emergency) treatment, excluding the US.

• Access to a wide range of hospitals.

• Highest possible ceilings for larger claims.

• No limits on surgery costs.

• Private room.

• Good evacuation package.

Many of the features, which make up a good, progressive international PMI policy, could equally apply to the UK market. In product terms the two are moving much closer together. However, there is one big difference between the UK PMI market and the global healthcare scene ' the PMI market here is growing slowly.

A recent survey conducted by analyst Laing & Buisson to the end of 2001 showed a growth rate of 1% and slowing. On the other hand, the expatriate healthcare market is expanding and booming. It is estimated over a million Britons work abroad and nearly half a million have retired to live in the sun. But in recent years, people have been flowing out of the country at an ever-accelerating rate. In 1998, the net outflow of British citizens, according to the Office of National Statistics, was a mere 4,000. By 2000 the exodus had grown to 46,000.

Traditionally professional intermediaries have sold the lion's share of international PMI policies. It is a market in which many more UK brokers and IFAs could make an impact. Many UK-based intermediaries are seeing their client profile change under the pressures of global commerce. Some of their richest clients are drifting away to retire in the Mediterranean or the southern hemisphere. They will still need financial advice in their new environment and it seems likely they will quickly appreciate the need for asset protection on the healthcare front. There is no doubt the parallels between the two markets, particularly in terms of products, will make the transition to international PMI much simpler than UK-focused brokers might believe.

Those who decide to turn their back on this opportunity may do so for reasons of business strategy. But there is a real danger that brokers who are not able to advise companies or individual clients on international healthcare will shortly find themselves losing out to firms that can.

As the international and domestic healthcare markets converge, this could be a good time to make a decisive move to protect your own assets.

Martin Garcia is managing director of Goodhealth Worldwide