PMI providers need to think outside the box

To: The Editor

From: Charlie MacEwan, head of communications, Western Provident Association (WPA)

As an insurer, I am surprised at the insurance industry's reaction to Buck and Willis' 'defined liability' ideas (Cover, February, page six). Surprised for two reasons, firstly because the apparent market leaders dismiss it without rational argument or alternative vision. Secondly, that it is an intermediary that promotes change in our industry rather than an insurer.

Buck and Willis cited: 'In five years' time, businesses will face an additional £1.1bn private medical insurance (PMI) bill...a 70% rise in the current cost of healthcare'. Your article indi-cated that 'providers dismissed the figures saying they are inaccurate and not in line with the true definition of medical inflation'. I disagree, the num- bers are in line with WPA's estimates, more importantly they have galvanised us into 'innovation' and taking a shared responsibility strategy. Even if we halved the estimates, they are still too high. The forecast is bleak for corporate PMI unless insurers think radically.

We are kidding ourselves if we hide behind the fact the number of insured is increasing. The corporate market is helping the PMI industry's statistics. We are being naïve in the present economic climate to say companies are not reviewing their employee benefits. It would be reckless to believe companies will not give up the PMI benefit on the grounds of cost.

I believe there is a real likelihood that corporate PMI could go the way of final salary pension schemes. If something costs too much, you do not buy it. If a benefit is taking up more of payroll, someone in the company will say enough is enough.

Is the PMI industry failing to innovate because the vision for the NHS is unclear? This is an excuse. The NHS is being repaired rather than overhauled.

The consultants' contract was rejected in November but the Government plans to implement it piece-meal. There will be a vote on GP's contracts in April, yet there is little debate. We need to reject short-term solutions and evolve a vision for the next 50 years. To survive we must innovate, manage healthcare costs and minimise administration margins. Tweak- ing our products is not enough. Low excesses have had their day, indeed they have been described as a 'ticket to claim'. Networks are not necessarily customer friendly and managed care has debatable effect. Limiting benefits reduces the costs but at some stage will cease to meet expectation.

High excess policies redefine the meaning of insurance versus assurance. There is no better buyer of healthcare than the person receiving the treatment. Last autumn, Julian Stainton, WPA's chief executive, was quoted:

'Customers of PMI have three options: put up with escalating premiums, give it up or adopt share responsibility.'

If the PMI industry fails to innovate we will go the way of the dinosaurs.

l Do you agree that the days of traditional PMI could be numbered? Is shared respon- sibility the way forward? If you have a view, make sure it's heard and email: kirstie.redford@ incisivemedia.com