The popularity of retiring to the sun and the marchof globalisation has created opportunities in theinternational PMI market. Peter Madigan reports
For advisers working in the private medical insurance (PMI) field, looking back at the health of the market in the last few years makes depressing reading.
With stagnant sales, rising premiums and nothing to suggest a turnaround any time soon, even the most hardened healthcare specialists are becoming disheartened.
One area that may offer valuable new business however is the international PMI market, a sector larg- ely neglected by the majority of intermediaries advising on domestic healthcare options.
Those in the market are reporting strong growth in both the individual and corporate arenas and there is plenty to indicate that this sector is only just getting started.
"On the individual side we are seeing vertical growth and I think this is, in part, down to the popularity of television programmes about relocating abroad," says Andrew Apps, managing director for international PMI at Good health Worldwide.
"These programmes are raising awareness about how easy it is to move abroad and more people are considering it than ever before."
Although individuals are increasingly exploring the possibility of escaping the UK, this activity is overshadowed by the rapid rise in the number of businesses transferring staff abroad.
"International business activity is growing rapidly as we see more companies investing more of their money internationally.
We have seen 10% growth per annum for the last 10 years," says Ron Buchan, chief executive at Allianz Worldwide Care.
It is undeniable that more people are working abroad than ever before and although there is no data on how many British expatriates and employees are based in other countries, it is estimated that there are 40 million expatriates worldwide.
Market forces "In terms of British expat movement we see a lot of inter-EU traffic particularly towards the East and the new member states.
The Middle East is another hub; there are 60,000 Britons in the United Arab Emirates for example," says Buchan.
The movement of foreign nationals to Gulf States does not seem to have been affected by the war and subsequent insurgency in neighbouring Iraq.
Indeed, the international PMI market has proved impervious to natural disaster, civil unrest, and, for the most part, terrorist activities.
"We did see a drop in business after the September 11 attacks as Americans were reluctant to go abroad but the market recovered soon after," says Buchan.
"Other than that, SARS, avian flu and the tsunami really haven't had much of an effect."
The international PMI scene is dominated by a handful of players.
BUPA International, Allianz Worldwide Care, PPP International and Cigna International lead the pack with other prominent players including IHI Denmark, Goodhealth Worldwide and Interglobal.
These companies cater for both www.covermagazine.co.uk individuals and corporate clients of all sizes, and although the very largest policies with the biggest multinationals will be out of reach of the average IFA firm there are plenty of opportunities to write new business for small to medium size businesses (SMEs), especially for those IFAs who already specialise in healthcare.
"An IFA that advises on UK private medical insurance already understands how the market works and the language is consistent.
For instance, terms like inpatient and outpatient are the same," says Paula Covey, head of marketing at BUPA International.
While the language may remain the same, there are fundamental differences between the UK and international propositions that advisers must be aware of if they are interested in entering the market.
"International private medical insurance policies should typically cover all that the UK does plus cover for primary care, such as GP appointments and prescription drugs, maternity care, treatment of chronic illnesses, some dentistry and evacuation cover as standard," says Mark Coleman, director for international sales at Cigna International.
There are also differences in the underwriting process that advisers have to bear in mind when talking with prospective clients.
"Individuals are still fully medically underwritten under an international plan but there is also the option of a moratorium so these plans can be pretty flexible," says Leslie Smith, managing director of Medibroker International.
While such moratoriums may seem to present a good means of covering chronic conditions that would have been otherwise excluded, providers are wary about such arrangements.
"I have always felt having a moratorium is a little risky since, if a chronic condition does flare up when you are on the other side of the world, then there is no NHS to fall back on," says Buchan.
In pricing international PMI schemes, providers primarily take two approaches.
Due to the greatly increased cost of medical treatment in the United States, many insurers offer international cover including, or excluding, the US and Canada.
"I think you could say with some certainty that you would roughly have to double the cost of your cover to include the USA and Canada in an international plan," says Apps.
The alternative to this is to implement a zonal pricing scheme in which the world is divided up into certain zones according to the cost of healthcare in the country where a person is residing.
"These rates more accurately reflect the country of residence and the customer's individual circumstances," says Covey.
So what opportunities exist for the humble British IFA? Providers are confident that the obstacles to entering the international PMI market are not unassailable.
"The problem is that advisers do not treat it as a product line; they just write a bit of business now and then.
It's not rocket science though.
All IFAs need to do is keep up to date with the main players and what they are doing," says Apps.
Providers are also taking steps to help advisers keep abreast of the latest developments.
"A working knowledge of international markets is all they require and we are happy to advise and update IFAs.
We send out regular newsletters to brokers and IFAs to keep them appraised of international market developments," says Coleman.
Alternatives However, some are urging caution.
"An IFA firm needs a healthcare specialist to look at international private medical insurance as it cannot be done piecemeal," says Smith.
"For some firms, especially under FSA regulation, the best option would be to use an affiliate partner and share the commission as in the majority of cases an IFA will not be qualified to discuss all the policies available."
The commission on offer certainly makes international PMI attractive.
With international cover, excluding the US, costing on average 30% more than a UK domestic policy, higher premiums naturally mean bigger commissions.
Add to this that conversion rates for international schemes are significantly better than those for UK plans, the work required to get to grips with the market increasingly looks like a shrewd investment.
With the trend of relocating abroad showing no signs of abating, and businesses increasingly exploring the potential of inve s ting capital in developing econ o mies, this may only be the beginning for international PMI.
"I would warn anyone against disregarding international private medical insurance.
There is a huge opportunity for intermediaries to set up as international healthcare specialists," says Apps.
"With a little research, the possibilities are endless."
