The boom times are here for the international private medical insurance market. The only problem is, advisers don't seem to be aware of it. Peter Madigan investigates Click here to download pdf
International private medical insurance (PMI) is said to be enjoying something of a golden age. Providers and brokers are reporting strong year-on-year growth as more multi-national companies relocate staff globally and increasingly affluent individuals retire younger to warmer climes.
Despite an apparent consensus among insurers and intermediaries that the international PMI market is booming, there is no independent data to corroborate such an analysis. With providers and brokers spread across the world, the task of compiling accurate market data is a logistical nightmare and simply too large an undertaking to be financially viable for a research firm.
In most circumstances it would be inadvisable, or even foolish, to simply take providers at their word when they say their sales are increasing rapidly. But since the feedback from brokers is also so overwhelmingly positive, the only conclusion must be that business really is booming.
"Our market is definitely growing by around 30% per year. Although there are issues about global security and such like, people are still going abroad on assignment," says Mark Coleman, director of international sales at CIGNA International Expatriate Benefits.
Other providers report similarly optimistic performances. Both Goodhealth Worldwide and BUPA International have experienced continued growth and Allianz Worldwide Care CEO, Ron Buchan, claims that the company has "experienced growth of around 10% every year for the last decade as companies continue to invest overseas".
Relocation, relocation
Again, with no independent data it is hard to distinguish whether average market growth is closer to 10% or 30%, but one thing that is clear is that this growth is being driven overwhelmingly by the corporate sector. "The engine behind the market's growth is undoubtedly group business. I would say this would account for around 80% of all market activity with the remainder being individual migration, the vast majority of which being northern Europeans moving south," says Buchan.
According to the Office of National Statistics, a record 362,000 people left the UK for a new life abroad in 2003, the last year for which figures are available.
This number has grown from around 250,000 migrants in 1994. With all expatriates requiring some kind of medical provision regardless of which country they are going to, these numbers may go some way toward validating the strong growth that providers maintain they are seeing.
"We cannot say that all people moving abroad buy some kind of healthcare, because at least half of all expatriates do not take out international PMI – they simply invest in travel insurance and think that this will cover them," says Leslie Smith, managing director of Medibroker. "In addition, we see a small number, probably around 10% to 20%, taking out annual renewal plans."
The rise in the number of annual renewal plans sold, although still a relatively small portion of the total international PMI spend, may well be related to the increasing popularity of shorter foreign assignments. Whereas in the past an employee could spend five or more years abroad and probably take his or her family with them, current trends favour far shorter placements with few lasting more than a year at a time.
Counting costs
The sustained growth that many providers claim the sector has enjoyed for the past decade seems to imply that the cost of international PMI, whether it has risen sharply or not, has failed to deter expatriates from purchasing cover. Of course, the simple explanation may be that they have no choice but to insure their health regardless of the cost if there is no state provision to fall back on.
In sharp contrast to the UK domestic PMI market, where the vague term 'medical inflation' is bandied about as a scapegoat for rising costs and falling sales, international PMI does not seem to be affected by the phenomenon. Pricing is based on the local cost of healthcare and the political stability of the region to which a client is relocating. It is predominantly regional changes – either political, economic or those relating to civil unrest – that are pushing up prices.
"We are flexible to changing environments but cannot penalise for one-off events," says Paul Andrews, business development manager at William Russell.
"Whereas Thailand and the Maldives remained coverable locations after the tsunami, we did cease offering cover in various locations during the second Gulf War. In other regions, rather than seeing cover restricted we anticipate costs rising for purely economic reasons. Medical treatment costs in China are now on a par with Japan, which has been expensive for some time. We could not have predicted this five to six years ago."
Growth opportunities
The vast difference in regional cost illustrates just how hard it is to make generalisations about international PMI as opposed to the UK PMI sector, where market influences seem to push prices up across the board. Unsurprisingly, the intricate nature of the international PMI field makes reaching firm conclusions about the future direction and sustainability of the market difficult.
Despite the lack of transparency that might be discouraging advisers from entering the sector, international PMI providers are moving to consolidate their positions. In June, BUPA International, itself a market leader, acquired two major international PMI providers – AMEDEX Insurance and IHI Danmark. The deal brought a further 340,000 lives under BUPA's care and effectively assured the British-based insurer a monopoly in the South American expatriate market. "The deal cemented BUPA International's position as the market leader in the individual international private medical insurance sector," says Smith.
There are also further rumours that Interglobal, another large provider which is underwritten by IHI Danmark, will also be acquired by BUPA International in the next few years.
Clearly there is great confidence in the longevity of the international PMI market and its potential for future growth. Many intermediaries now expect to see more acquisitions by the bigger providers in the next few years.
With several hundred thousand people leaving the UK every year and this number set to rise, intermediaries have an opportunity to tap into a huge market. Perhaps the biggest incentive is that, as opposed to its domestic stablemate, international PMI does not need to be sold. In the vast majority of cases, people going abroad will have little or no knowledge of the healthcare provision in their destination country, so it is highly likely that they will buy international PMI. The sheer volume of fresh customers appearing every year should send advisers scrambling to grab a slice of this market.
Customers are buying cover and will continue to do so. If intermediaries do not start to market themselves more aggressively, then clients will continue to simply buy direct from international PMI providers unaware of the possible exclusions and restrictions that a bargain policy includes. It is bad enough to discover you have patchy cover in the UK when you have the NHS to fall back on, but discovering the same thing on the other side of the world could have serious consequences.
The international PMI market is buoyant and the immediate future looks bright. The market has shown its resilience to terrorism, natural disaster and infectious diseases, and the continuing expansion of multi-nationals into other parts of the world can only mean the market will continue to go from strength to strength. Whether it is only the providers who profit from this market is up to intermediaries to decide.
