Playing catch up

There is a consensus in the industry that private medical insurance (PMI) is too complicated to be sold online. This is something of an irony given that technology should help simplify sales. The 'too complex' line is possibly an excuse for those unable to use or devise the right technology to serve this market. But with calls for a simple and easier-to-understand PMI product, perhaps the future for PMI technology lies in a meeting of minds as regards structures and designs of products and software.

The need for improved technology in the PMI market is acute in two areas: selling and enabling the product to be bought, and easing the administrative and back-office work around the sales process.

A number of PMI providers feature premium rates for their products on their websites and have the facility for clients to get quotes or even buy online. But for intermediaries looking for a comparative quotation system MediQuote is the only option. IFA online trading platform AssureWeb does not offer PMI although it is looking to do so in the next 18 months.

The Exchange meanwhile has put off incorporating PMI onto its service largely because there has not been the demand from IFAs or providers.

'There is little standardisation in PMI products in the market,' says Charlie Musson, press officer at The Exchange, 'and to pull together a service within that would be a major task. Without the demand there has seemed little reason to do that, but if there were demand we would consider doing it.'

It is this issue of demand, which time and again gets insurers out of improving their technology offerings. But it is safe to say PMI has not taken off as an online product. In the main it would appear that what online facilities there are available for clients and advisers alike are used for price comparison and as an educational tool ' not for actual purchase online.

A high price

Apart from an apparent lack of demand from the industry, there are a number of reasons why PMI has not taken off technology-wise.

The root of the problem is providers' reluctance to use comparative quote systems due ' depending on who you talk to ' to concerns over comparing like for like products, to an insurer's concern over how their rates will stack up against another provider and to the market not being large enough to justify the expense of investing in technology.

'The resistance seems to be when providers feel they may be losing control over showing their information in a comparative way to everyone else,' says Mike Dodd, managing director, insurance division, at MediQuote. 'Some are fearful of how bad they might appear compared to everyone else. The resistance is unfortunate because if you look at the business in five years it is all going to be electronic. Customers will not want to go onto providers' separate sites ' they want an aggregator ' something that can show them the comparative benefits.'

But even insurers who have signed up for the MediQuote system highlight the problems of comparing PMI products online.

Neil Armitage, marketing director at Exeter Friendly Society, says: 'It is a complex product to compare online because you are not always comparing apples with apples. We include other types of benefits that are not financially based such as telephone helplines that would not immediately be obvious in terms of factoring it into a quote engine. You do not always know what benefits you are getting. Some organisations talk of a policy in terms of total benefits payable. We would talk in terms of a number of nights in a hospital. How do you compare the two?'

Stephen Flanagan, director of sales and distribution at BUPA, agrees: 'A problem exists if systems are not comparative enough and that is where we have a difficulty. With Heartbeat, our main personal product, there are a lot of questions to be answered before a quote is produced because it is a risk-based product. If you have a commodity product where you are buying basic cover the systems do lend themselves to that. We have some products which will fit into that category which is why we are considering some of these systems, but at the moment we have to take the decision that we will not do anything with our full suite of products.'

It is this argument, that PMI is not a commodity product in the same way as car or household insurance and because it is more complex with products offering different features, that is held up to mean it is more difficult to compare different providers' products on site.

Easing the paperwork

But even if technology is not being used to boost actual PMI sales, there are still calls for greater use of technology in easing and speeding up the administrative and sales-generating process. While the complexity of PMI may not lend itself to being sold online, it is this very complexity which increases the need for technology to simplify the selling process.

'We are trying to get insurers to invest more in technology from the point of view of online administration of policies and online sales,' says David Collinge, managing director of specialist broker SMQ Services Ltd. 'Through MediQuote we can complete an application online with Standard Life, but it is the only provider that seems to be running with that. As an industry most PMI providers are behind the life and motor insurers. The electronic side is very important, but some way off.

'Take Norwich Union for example. On the life and general insurance side, it is state of the art with the latest technology for brokers to do online business, but when it comes to PMI, Norwich Union Healthcare is in the dark ages in terms of technology. We just about receive emails from them,' he adds.

Catch-22

It seems the market is in a Catch-22 situation. Collinge say the fact the market does not seem to be growing as much as it has in the last few years, could explain why insurers are reluctant to invest in technology. Ironically, the only way to make the market profitable is by investing in the e-commerce ' helping advisers to cut down the time spent on administration.

Collinge says: 'We waste so much time with insurers on the errors they create and the amount of paperwork we have to deal with. If more insurers signed up to MediQuote (because there are a number of big ones that will not) it would make our life easier. If an insurer is not on the system we have to obtain the quotes manually, either by fax or email, so it is time-consuming if you are evaluating, for example, just one little group scheme.'

But despite Collinge's claims, Tim Baker, commercial director of Norwich Union Healthcare, feels his company is offering a lot in the way of technological support through its website facilities and by appearing on the MediQuote site.

'Demand has not been there until relatively recently,' Baker says. 'I think it is uncertain at this stage as to what extent demand is there.'

For the time being the best one can make of the situation is that the adviser's raison d'être stands firm. Advisers are still needed for their specialist knowledge and advisory skills ' whatever the level of technology. While systems like MediQuote are useful for broad comparisons, individuals will still need their advisers to know the whole market.

'Advisers have to know the industry,' says Rachel Jenkins, marketing supervisor at Clinicare. 'They must know the product they are selling. If they want to use a core of products, fair enough, but I do not think there is a short cut to sell PMI. Even if you concentrate on a few products you still need to know about everything else on the market because you need to justify your recommendation.'

Les Curson, director of healthcare and management consultants Nicles Limited, agrees that whatever the technology, the PMI broker still has a lot of footwork to do.

'One of the dangers of quote sites is you can look at the benefits and then you look at the prices but you do not get any advice on the small print. You can say the lowest quote is company XYZ, but you do not know how good it is at paying claims, or its attitude to underwriting.

'PMI is not like car insurance ' there are too many factors you need to be aware of. You need someone who knows what they are talking about. You may have your own panel of providers and know what your client wants, but you need to marry that with what you know of the market and get on the phone to find the right cover,' says Curson.

So the message is that intermediaries have to make more demands for investment into PMI and the technology to drive the market.

'PMI has been the most difficult sector to move forward,' says Dodd. 'As a software provider we can only provide the technology. We cannot change the market ' that has to come from the market itself. But brokers are using MediQuote more and more, volumes have risen and I think broker pressure will drive providers on to embrace comparative technology for PMI, like it did the car and household insurance providers.'

Stephanie Spicer is a freelance journalist

• There is currently only one comparative quotation system for PMI ' MediQuote.

• Lack of demand for online PMI comparisons has prevented providers from investing in sourcing systems for advisers.

• Risk-based PMI products are hard to compare onscreen, so it is unlikely providers will be able to provide online comparisons for their full PMI product ranges.