Partner Insight: Do private medical insurers really try to wriggle out of paying claims?

The current regulatory framework simply won’t allow this

Gareth Jones
clock • 3 min read
Partner Insight: Do private medical insurers really try to wriggle out of paying claims?

Firms must always act in their customers’ best interest and there are stringent fines for those that transgress, says WPA

There remains a misconception in some quarters that private medical insurers will do their best to wriggle out of paying claims. This has led some to believe health insurers ‘rely' on customers never claiming to make their profit.

Yet even if insurers wanted to adopt such a business model, the current regulatory framework simply would not allow it.          

Health Insurers operate within the strict regulatory framework provided by the Financial Conduct Authority (FCA), whose aim is to make financial markets work well so that consumers get a fair deal.  Firms must always act in their customers' best interest and there are stringent fines for those that transgress.

Charlie MacEwan, corporate communications director at WPA, says: "Treating customers fairly echoes throughout our industry and regulation is there to help us ensure that we all have customer focussed cultures thereby ensuring the best outcomes for them."

Diversification needs

As a rule and sometimes referred to as the premiums of the many paying for the claims of the few, PMI providers base their business models on the diversification of their customer bases, aiming to quantify individual risks and redistribute them across a much larger portfolio of customers that collectively poses less risk. 

A proportion of the average business model also focuses on premiums to increase profits, with underwriters working out the terms policy holders are offered at outset with actuaries providing input about future morbidity rates.      

Vive la difference 

But no two insurers are the same and those with not-for-profit structures, like WPA, are not subject to pressure from shareholders.  

MacEwan continues: "Ensuring the money that customers spend with insurers is redistributed into creating better services is key to making sure the industry and our products are valued."

Although, like any business, WPA must make enough money to cover its costs, any surplus is reinvested into the business, services, training and people. Without any ‘owners', the vanity subjects of turnover, profit and market share cease to exist. 

Consequently, a focus of the Leadership Team is how customers are being looked after - how long it is taking to pay claims, answer the telephone calls, complaints and compliments along with other customer-focused metrics. IT developments are measured on how they will improve the experience of customers.

Unlike many other insurers, WPA has an alternative to no claims discounts because these can deter people who are ill from claiming - the purpose of having a policy in the first place. And it was the first UK insurer to pay rebates in 2020 when access to private healthcare was constrained during lockdown - something which, 20 months on, major players in this sector have still to do. 

WPA's proactive stance in observing lockdown claim levels and insisting that customers enjoyed appropriate rebates in both April and June 2020 is in fact the polar opposite of relying on customers not to make claims.

This myth-busting article is one of a series of 10 addressing common myths around PMI. Access the full list

This article was funded by WPA

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