Ian Talbot examines how brokers can find innovative ways for clients to retain their PMI policies while also continuing to treat customers fairly against this backdrop of economic upheaval.
The current economic climate is affecting all professions, brokers being no exception. This is why it is more important than ever that they are well prepared when facing customers, ensuring they have all the answers and justifications to keep them happy. Selling finance products to new customers is currently an uphill struggle so the focus for financial advisers needs to switch from attracting new customers to retaining existing business.
All companies, but particularly small to medium-sized enterprises (SME), are currently looking at cost-cutting measures, with employee benefits often the first to be reviewed. In the current climate, brokers need to be prepared for the fact that many customers will not wait for annual reviews and will want to look at changing or cancelling products mid-contract. Investing in private medical insurance (PMI) policies for staff can be a costly outlay for many companies so it is not surprising that brokers are seeing this as one of the first things to be questioned. It is down to the adviser to justify the value of PMI for both the employer and employees.
Although existing customers have already bought into the benefits of PMI, there is still a general misconception that this is a luxury product so should be considered for cancellation during a recession. When people have less money to spend, it is the more expensive policies that come under pressure so brokers need to be looking at more cost effective solutions.
Customers with existing PMI policies are generally aware of the benefits that offering a PMI policy brings so they do not need to be sold on the usual ‘reducing sickness-related absences’, ‘boosting staff morale’ and ‘increasing company loyalty’ messages. Instead, employers will want to see what they are getting for their money and, more importantly, how they can get more for less.
Retaining clients is about ensuring they are on the right product and that they can see the ‘added value’ they are getting from it. Brokers would therefore be wise to recommend flexible products that offer employers real value for money. Flexibility is the key in these uncertain times and, by offering an adaptable product, it reassures the employer that they are not stuck with something that is not working for them.
Flexibility
A product that has flexible payment terms will appeal to employers because a policy in which the company can set the premium level and have the option to increase or reduce it, in line with the level of cover offered, will ensure the product can be adapted to mirror the performance of the business.
It is also important that the employer can see and appreciate that their employees are benefiting from the policy. Many traditional PMI products can only be used when the individual covered is taken ill and this can lead the company to question the return it is getting on the investment. Products that allow the individual to claim for smaller everyday treatments such as optical and dental ensure that staff will be claiming on the company’s investment each year so will see real benefits. It is these products that brokers need to be recommending to demonstrate the value for money that the customer is receiving.
In addition to looking at more cost-effective premium costs, brokers should also be recommending innovative ways for customers to keep their PMI plan while reducing costs. This could involve suggesting that half of the premium cost is covered by the employee instead of the employer paying the full amount, or companies could encourage staff to add on dependants who could pay for themselves which would, in most cases, reduce the cost that the employer pays.
Another big issue for SMEs at present is the debate over sharing claims information for small group schemes which is not currently common practice or mandatory. A lack of transparency in the sharing of claims information only serves to make it difficult for intermediaries to advise their clients properly as they do not have sight of the full risk data. This means that the end result could see the policyholder losing out on the most appropriate and competitive deal for their individual circumstances.
Muddied waters
The reality for community rating is that for it to be truly successful the industry must adhere to standard levels of pricing. As insurers begin to apply claims loading and penalties for poor performing schemes, the concept falls apart and doesn’t work. Recently, the waters have been further muddied with industry-wide confusion over the exact pricing criteria for schemes in relation to SMEs.
The industry needs to agree to be more transparent with regards to claims data and pricing because if insurers launch and sell true community rated products, there should be no need to disclose claims data.
However, if insurers then want to give discounts in relation to age and claims history for each scheme, then claims data must be disclosed otherwise insurers could be accused of not treating customers fairly.
Cutting through confusion
The SME market is looking for products that are priced in a transparent and easy to understand way. Therefore, until this confusion is settled, brokers should look to recommend completely transparent products that offer guaranteed level premiums which will not increase with age or claims history to cut through the confusion for SME schemes.
While it is important to find a product that the client is happy with, it is equally important to communicate the benefits of the selected policy to the workforce. If staff are just told that their benefit is changing, with no explanation, they can perceive as a cost-cutting measure that they lose out on. Instead, if the benefits of the new product are communicated at the outset, then staff will be onboard with the change, which is invaluable for an SME.
However, the responsibility for highlighting the benefits to staff should not purely lie with the broker, insurers should be assisting inter-mediaries by going into workplaces to demonstrate product features and benefits. This is a move not currently practised by many insurers but it is something that has worked to great effect with National Deposit and SMEG recently, for example (see pull out box).
In the current climate, it is to be expected that companies will review employee benefits as they are looking to streamline operations and reduce costs but in order for brokers to maintain business, they need to be fully prepared to handle client reviews. This means treating every single customer on an individual basis and recommending products that are the most cost effective for them and that will offer real value for money.
Ian Talbot is head of intermediary sales at National Deposit
