Last year's high hopes that international PMI was set to boom have dissipated into uncertainty. Peter Carvill explores how the financial downturn has affected this previously confident market Click here to download pdf (PDF, 1.4MB)
Last year, the talk was that the international private medical insurance (PMI) was looking forward to a period of mass expansion: more and more people were leaving the UK to live abroad, the simple flow of commerce was making it easy for businesses to spend on their workers and globalisation meant that PMI services taken up by employers were often bought outside the country they were used in.
The short story of what has happened in the last 12 months is that the financial system has begun to collapse under the weight of bad debt and mismanagement. The situation has become so precarious that there is talk that more countries, such as South Korea and Pakistan, could join Iceland in skirting with bankruptcy.
Where this leaves the international PMI market is uncertain, particularly when there is no centralised record of how sales have performed in the last year. Any impression to be gained must come from anecdotal evidence from the interviewees. Basically, there is no hard, qualitative evidence either way of an increase or decrease in the market.
"It's difficult to say," says Steve Nelson, international sales adviser at Medibroker, when asked about whether sales have increased or decreased in the last 12 months, "We have had a changeable year. It's been one of transition. We haven't seen a decrease in sales but we have seen a decrease in the leads we generate. We've had an increase in sales but fewer leads."
Rosanna Turner, marketing manager at William Russell, also reports sales have gone up but cautions that the full effect of the credit crunch or recession is yet to be felt: "We have noticed an increase. What will happen after this month, no one knows because people are worried about spending money."
Colin Boxall, non-executive member of the Association of Medical Insurance Intermediaries and a director of the ADVO Group, simply says: "The short answer is we haven't seen any decrease or increase in sales - it's been business as normal."
Complex findings
Asking about how the individual and group sides of the market have fared is equally complex. Turner reports that the broker side of business - which handles the majority of group sales - has remained fairly steady in the last year. However, she added that individual sales were more likely, in her experience, to be purchased on the internet rather than through a broker.
"What we have seen," says Lee Gerry, underwriting manager at Expatriate Healthcare, "is either a plateau or reduction in the group membership. This is expected to be attributable to the global economic downturn with companies either experiencing a tightening of their budgets or bracing themselves for the impact of continuing economic deterioration."
As to how sales have fared, Boxall says it was a tough call considering that the credit crunch had impacted so suddenly and with such great force on the economy: "It's difficult to give a definite answer, the reason being that the financial troubles in the world haven't hit home yet so the impact - the expected downturn - hasn't filtered through. Before we moved into credit crunch territory, there was an upbeat feeling that expansion was moving ahead and companies were advancing into new markets so the international PMI sector was very buoyant. Whether that will change as things start to bite will have to be seen."
Tim Slee, global sales director at Bupa International, is more upbeat about the immediate future, almost discounting the effects of the recent turmoil in the markets: "The way that the split has been panning out over the last two years is consistent growth in all three sectors - small, large corporate and individual. We've seen growth in all three and I anticipate that continuing."
The usual suspects filtered onto the list of countries where the product remained popular with interviewees citing the Middle and Far East, and China. India was reported as supplying more leads. Perhaps, surprisingly, Eastern Europe with countries like Bulgaria, Kazakhstan and Azerbaijan were reported to be driving an increase in demand for the product. The reasons offered for this included that some were increasing in popularity as a destination point for retirees, and the opening up of some for mining of their natural resources.
Drivers behind the market this year were run-of-the-mill developments such as legislation and decentralisation of businesses. Nelson, in particular, notes the effects of new regulations coming into force in Dubai, saying that his company was receiving more calls from people who wished to know what they needed when living in those areas.
Incoming legistlation
Turner adds that incoming regulation is acting as a boon to sellers of international PMI: "There's always new legislation occurring through the world where governments are saying that expats have to have health insurance, whether that is a domestic private policy or an international one. That helps us enormously because there is positive purchasing availability to begin with."
Slee concurs on this point: "I think there is a growing trend in regulation where a number of countries are becoming more aware of international insurers and the need to have organised healthcare systems. The main one would be Abu Dhabi where legislation came in 2008 and continues to be tightened."
However, decentralisation may hinder this source of new business, especially if businesses find that shared risk may mean a lower price but restrictive bureaucracy. Boxall illustrates: "I find that the larger companies are taking more of a view to decentralise whereas there was a move to bring everything together to benefit from combining the risk and bringing it under one provider. But there's been a realisation that local areas have local needs. If you're in Hong Kong, you don't want to be doing your administration and claims in the UK. Everything has a day's wait on it.
There is a move towards realising that local providers, insurers and brokers can be more effective. Although they may not be familiar with collective contract deals, they have the advantage of being on the ground with local knowledge. That's something I have noticed - that local HR directors have been investigating local providers."
Optimistic attitude
Regulation has been named a major factor for the international PMI market next year: "More and more countries are enforcing PMI for expats," says Turner, "so that will always be a positive for us. In terms of negativity, there is nothing that I'm aware of apart from the credit crunch that will affect us."
Slee says products would have to become more varied and changeable in order to take advantage of the market: "I think it will be one thing. There is a need for more tailoring and ability to match clients' needs. The market has become more sophisticated and providers, insurers and deliverers need to match needs more appropriately, whether that's in modular solutions where a client can build a product to their own needs. The credit crunch will definitely have an impact in some form of fashion. People value healthcare, while we hope global recession doesn't happen, people try to keep PMI and international PMI for as long as they can."
Gerry adds that the falling value of the pound against other currencies has negatively impacted on British expatriates: "Where lifestyles are financed from a UK bank account or pensions are received into a UK bank account, an expatriate's income has effectively reduced by 30%."
Looking to next year, the credit crunch which has the capability to turn into a global recession is on people's minds as the thing most likely to make an impact. Peter Rousseau, global business development director at Interglobal, sums it up: "I see global financial problems continuing, permeating and adversely impacting certain markets more than others."
Like everything else about international PMI, the effect, according to Turner, is hard to predict or fully calculate: "It's difficult to say because our client base is global. Each country has its own economic climate. Insurance is nice to have but these types of insurance - health, life and income protection - are very important because if someone falls ill in a foreign country without a great national health system, they still need good care to protect them and their families."
She adds: "I suspect there will be a slight tailing off, but time will tell."
"What will affect the market next year," says Gerry, "is the continuing global economic downturn."
"However," he adds, "this does not mean that it is all doom and gloom: more and more people want to live and work abroad. Customers are changing their tastes in the countries in which they are happy to reside, reflective of housing prices. People want to move abroad earlier and they don't want to leave the move until their twilight years."
Rousseau thinks, though, that international PMI providers have an advantage in this climate: "By operating in a truly global market, they enjoy the benefit of diversification across the world. Through selling into many different countries, markets and sectors, this will act as a distinct buffer - insulating them to a large extent from feeling the pinch."
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