Political instability and global health threats have failed to cause a slump in the international private medical insurance market. Angela Faherty reports
Despite the threat of SARS and the crisis in the Middle East, the international private medical insurance (PMI) market is thriving. While these external and dominant forces, coupled with a general slowdown in world economic activity, threatened to challenge any potential growth in the market, the international PMI sector has held its own. Sales have remained stable and these issues have had very little impact on the overall state of the market.
Bouyant market
"There are several influences affecting the international market at the moment," says Paula Covey, head of marketing at BUPA International.
"SARS threatened the market significantly as did the ongoing situation in the Middle East. But in spite of this, we still saw growth over the last 12 months," she says.
In contrast to the domestic market, the international PMI sector is doing well. Providers are seeing an increase in demand as well as take-up and shifting market dynamics means this trend is likely to continue for the foreseeable future.
"International private medical insurance is a buoyant market. The beauty of the sector is its diversity. In some cases you may get a country where there is not much growth and the market isn't that exciting. On the other, you may find that a lot of younger people are moving to a particular area and that certain countries are a hub of activity," says Peter Rousseau, business development director at Interglobal.
Rousseau adds the key areas for future market growth are East and Central Europe and the Middle East. These areas have seen a great deal of movement over the last few years. The expansion of the EU has encouraged greater movement between countries and the recent war in Iraq means that many construction companies will be moving in to help rebuild the country.
However, both these factors also act as a threat to the market's future, particularly as providers have no control over political instability throughout the world and events such as the crisis in the Middle East could have a two pronged effect on the market.
"There are two schools of thought on what may happen in the Middle East. Companies may pull expatriates out because of the growing concern surrounding their safety. Or, it could have a positive effect and heighten the profile and the need for international private medical cover for those people living abroad. So far, it has not had a negative impact," says Covey.
While providers are reporting growth in the number of international PMI policies being sold, finding actual figures for market growth can be difficult. A general slowdown in world economic activity caused sales to stagnate over the last couple of years, but on the whole, it is estimated that the market has grown by 15% over the last year and will grow by a similar amount in the next 12 months.
Reports from providers in the market support this. Interglobal reported a remarkable 50% growth in new business over the last year and Allianz Worldwide Care, BUPA International and Goodhealth have also seen an increase in sales.
However, where this business is coming from and where further growth potential lies is debatable. Ex-patriates sent overseas by their company for a certain period are easy to track down, and in the main a high number of intermediated sales are company driven. However, individuals who move abroad are not specifically localised to one particular area so tracking them down can prove difficult.
Complexity
"The corporate sector is more proactive with regards to sorting out cover, as health insurance is considered part of the package when an employee is moving abroad to work. However, people who move abroad to retire or in search of a better quality of life are not as easy to track down. It is here the intermediary has to be on top of their game if they are to secure their business," says Andrew Apps, European sales and marketing director at Goodhealth.
The individual market certainly offers a great deal of opportunity for intermediaries looking to expand their business. While 65% of the corporate market is sold through intermediaries, most of the individual market is bought directly with only 15% of policies bought through an adviser.
However, because of the widespread nature of the international market, addressing this issue is not without its challenges as Claude Daboul, general manager at Allianz Worldwide Care, points out.
"Distribution is a major difficulty in international business. The multi-national corporation can be difficult to sell to and the individual market is scattered across the world and is costly to address," she says.
To overcome these challenges, Daboul says that the market will have to become increasingly sophisticated in the future with insurers and intermediaries becoming more expert in the delivery of healthcare mechanisms in different parts of the world. Therefore, the role of the adviser is integral to the changing shape of the market.
"The range and complexity of plans available mean that professional advice is necessary to aid the buying decision," Daboul says.
Perhaps one of the biggest challenges facing the international PMI sector at the moment is education. Much like in the domestic market, many people do not fully understand what they are buying, particularly if they are buying directly with a provider.
An example where individual clients in particular may fall short is on the issue surrounding chronic conditions. On many international plans chronic conditions are not covered because they are derived from domestic UK plans, where they are also not covered because the NHS exists to provide treatment in these cases. However, there is no free competitor to the international market abroad, so clients choosing a plan without coverage for chronic conditions are leaving themselves exposed.
"Getting people to understand what they are buying is one of the biggest challenges we face. One of the dangers of the internet is that, while it has spurred on the market in some ways, many clients may buy on price and this is dangerous as they will leave themselves exposed in certain areas. This is where the intermediary's role is crucial," says Apps.
One of the other challenges currently facing the market is managing the cost of healthcare on a global scale. In the US and certain parts of the Far East, such as Hong Kong, medical costs are far reaching. Controlling these, particularly from the other side of the world, can prove difficult.
To combat this, providers are adopting similar methods used for their domestic plans, such as hospital networks to help control and better manage claims costs that can escalate quickly. BUPA International in particular uses hospital networks to keep costs down while Allianz Worldwide Care believes the future of cost control lies in more advanced all-encompassing healthcare management.
"In the future, provider network and assistance services will need to become more comprehensive. Cost control and medical case management is always more of a challenge when dealing with a provider on the other side of the world," says Daboul.
Holistic approach
As the healthcare sector becomes more global, the market is also shifting towards a more holistic approach to private provision to help lower costs. Interglobal, for example, was one of the first providers to introduce a 'wellness' benefit on its international plans. It has also introduced a compassionate emergency and emergency family evacuation benefits for its policyholders.
"The wellness benefit on our plan aims to lower the eventual cost of treatment because early intervention means the problem is tackled at the earliest possible opportunity," says Rousseau.
In contrast to the domestic market, the opportunities in the international PMI sector are ample. The demand is there for both corporate and individual clients, and the lack of a free competitor only serves to heighten the need for cover. Issues surrounding chronic conditions means intermediaries are very important in the sales process, particularly in the individual market where customers are at risk of buying solely on price. To help continue to expand the market, providers are working towards adopting a more holistic approach to international plans in an attempt to control costs and better manage healthcare claims abroad. Intermediaries that meet the needs of consumers will be well placed to advance the market further.
COVER notes
• It is estimated that the international PMI market grew by 15% last year.
• Central and Eastern Europe and the Middle East show the greatest potential for growth in the sector.
• The individual market presents advisers with an ideal opportunity to grow their business.
