It's no secret that demand for PMI has declined in recent years. But as corporate firms regain their confidence, group PMI has much potential following a renewed focus on value for money. Fiona Murphy reports.
Private medical insurance (PMI) has dwindled to an alarming degree over the past five years. A key reason for this was the tightening grip of the recession on company expenditure, with staff numbers and benefits taking huge cuts.
We do not yet have Laing & Buisson's figures for how the PMI market fared in 2013, but in 2012, it was clear there was a slight increase. The survey said demand for health cover was ‘solid' in 2012 as the number of private medical cover policies in the UK (insured and self-insured) moved upwards by 1.1% to reach 4.033 million at the start of 2013.
This followed stable demand in 2011 when policies edged down very marginally by 0.1%, but a sizeable contraction in policy numbers of nearly 8% overall during 2009 and 2010.
The survey said: "The small rise in policies during the year was driven by a shift towards self-insured medical expenses schemes (typically written under Trust), which offer large companies Insurance Premium Tax (IPT) exemption and scheme flexibilities. Of the 58,500 rise in company-paid policies during 2012, equivalent to 2% growth, 35,700 were self-insured by employers, and 22,800 were insured."
Iain Laws, managing director of UK healthcare at JELF Employee Benefits agreed there has been a boost in group PMI business over the past 12 months.
He said: "Growth in the market remains fairly slow, but we are definitely finding new companies taking out PMI for the first time. That is a change we have found over the past three years. Companies want to offer medical benefits, not just medical insurance, to a range of, or all employees, where they currently do not provide that. That's definitely a growth trend."
Laws explained this growth has particularly been apparent in cash plans, which address challenges between what companies want to achieve in terms of employee wellness and what they are prepared to invest.
He added: "Companies are looking at PMI light type products to introduce to their uninsured population. This trend has come to the fore more in the past six to 12 months, without a doubt. We're generally seeing an appetite in hierarchal benefits and an increased acceptance that hierarchal benefits are acceptable, particularly where they have not provided anything in the past."
Dr Doug Wright, medical director at Aviva UK Health, agreed there has been a renewed appetite from companies of all sizes to invest in group private medical insurance and wellbeing across the board.
He said: "I would say there is an uptick in confidence from employers over how to fund PMI and how to start thinking about how they can fuel appetite from their employees. I don't think the core products have changed, but what we're seeing is a lot more tailoring and a broader agenda on wellbeing for the entire workforce.
"You're seeing people look at where the core issues for them as a business, where the core claims are, how it impacts absence and productivity, particularly musco-skeletal and mental health."
Intermediary challenges
Group private healthcare, particularly in the corporate space, remains dominated by employee benefit consultancies (EBCs) giving advice over benefit implementation. We have yet to see IFAs play in this market despite auto-enrolment opening up new opportunities. However, EBCs, despite their comfort in the market, are experiencing a number of challenges.
Laws said: "The main challenges are helping companies build a robust business case for investing in health benefits. While it is the right thing to do, they need to build a case for return on investment (ROI), which remains a challenge for intermediaries to identify that. Using absence data is a vehicle to do that, but not many companies are great at recording absence. That's the bit PMI can help to tackle.
"Other challenges are client expectations increasing that the service will deliver and a particular focus on driving fees down: so more for less. And competition remains high between insurers. This means we have to do a lot in brokerage, and competition remains fierce between intermediaries."
Richard Holden, commercial director at Chase Templeton explains challenges
for brokerage firms around insurer expectations.
He said: "The claims behaviour of family businesses are often different from that of larger SMEs, and that can tend to put extra pressure on the broker from an insurer point of few. More than ever, insurers are looking at bottom lines. It's not all about market shares and new business; it's about the loss ratios of those portfolios. Smaller SME clients are probably a bit more exposed as insurers looking at profitability."
