Peter Le Beau, Le Beau Visage As someone with a background in life assurance I have been suggestin...
Peter Le Beau, Le Beau Visage
As someone with a background in life assurance I have been suggesting for years that PMI could adopt more sophisticated pricing and rating methods. When I complained that it was using a blunt object to carry out a relatively delicate procedure, PMI veterans used to look at me and shake their heads in resignation at my inability to understand why their product was different. But markets move on and so must products.
Consumers have been largely underwhelmed by individual PMI in recent years. It is increasingly important to look at risks individually not just in the context of a large cohort that in general will exhibit particular experience and providers are now realising this pretty rapidly.
I am delighted to see this product from AXA PPP healthcare and I expect other new ideas to follow it into the market in the near future. This is the way in which markets exhibit real growth and embrace new customers not just ones disillusioned by other providers.
Stephen Walker, Medical Insurance Services
The foundation stone of the insurance industry is good risk assessment and underwriting. The PMI industry has been blighted for many years by a reluctance to adopt adequate underwriting procedures. This may be due to the cost factor ' thorough underwriting may be perceived to be too costly. Or perhaps insurers feel that a lengthy application form is a potential obstacle to writing business. Too many insurers have, in the past, seen moratoria as the easy option, but to their cost. Proper risk assessment will, certainly in the medium to long-term, save the industry a lot of money.
Common sense dictates an insurer should make every effort to ensure they are able to establish exactly what level of risk they are taking on board. If full and proper assessment is not made, an insurer's portfolio will represent a higher level of risk than it should, which will eventually lead to higher costs in terms of claims, resulting in escalating premiums. AXA PPP healthcare is right to adopt an individual lifestyle method of underwriting. By doing so it will be protecting its client portfolio by minimising premium increases. I wrote in COVER, January 1998: 'Good underwriting does not need to be draconian in its approach. PMI providers need to assess their current underwriting procedures and ask themselves whether they are writing sound business, or taking on board unnecessary risk.' It has taken a while for the message to get through.
Howard Hughes, BCWA
Although individually underwritten PMI is an attractive concept, providing in principle the right match of risk and premium, it does have its drawbacks. Not in the least because the public are notoriously bad at the rigorously honest self-analysis that enables the collection of reliable lifestyle data, for example drinkers tend to underestimate the units of alcohol they consume, or from my own experience, gym membership or even regular attendance at the gym is not necessarily proof of a disciplined exercise regime. Indicators are only indicators and peoples' habits and lifestyles can change over time which can become a concern at the point of claim. Although insurers who promote this type of product would disagree, another important concern is the burden of collecting and verifying individual data may make the product too complex to sell.
