The UK private medical insurance (PMI) sector has being going through a tough time in recent years, so perhaps, writes Owain Thomas, it is time for healthcare intermediaries to take a look at the bigger international picture
In most industries a market with a global potential of 58 million customers would seem to be a no-brainer. So it is even more surprising that the international private medical insurance (IPMI) sector is such a niche among brokers. However, with much of the world freeing it self of the economic shackles more readily than Europe and the USA, there are certainly signs of growth already occurring.
That is not to say it does not have its issues, as all industries will, but there is a feeling among most protagonists that these are by no means significant enough to restrict IPMI into stagnation, such as the UK domestic market is experiencing.
Steve Nelson, sales manager at April Medibroker, is adamant about the most pressing issue.
"Over the last 12 months, prices have increased quite dramatically and that's probably the biggest issue facing the market," he said.
"If someone's renewal premium has only gone up 10% we are thinking ‘that is not too bad', but double digit percentage increases cannot go on year on year. It has been pretty much across the board, with most plans increasing annually, and some even having two increases a year.
Bitter pill to swallow
"Taking it from a client's point of view, if your insurance has gone up 10% when you have not made any claims, it can be a bitter pill to swallow," he added.
Nelson is aware that increasing treatment costs and general medical inflation can be to blame for some of the significant price hikes, but raises a point that he accepts many providers may not thank him for.
"This may be controversial, but I cannot help thinking that individuals perhaps end up subsidising groups," he said.
"A group of 30 employees is going to get a substantial discount compared to 30 individuals but it does not necessarily say that those individuals are going to claim more than the 30 employees. And the double whammy is that with 30 employees you are going to have medical history dis-regarded, so if you have got someone with a minor ailment they are going to have a lower premium than an individual who would probably have it excluded," he added.
It is not all bad news however, far from it. Despite the premium increases, demand is still strong across the market, with the obvious global nature of the product meaning that sales are not suffering from the economic pressures prevalent in the UK. As opposed to domestic PMI, which is effectively a luxury to supplement the NHS, its international cousin is seen as a necessity by those working abroad.
As Nelson explains, the only real competition is with local plan providers and the main concern of brokers in this case is educating clients about the differences.
"We are still fighting against local providers who can be a lot cheaper," he said.
"As international brokers we have got to advise clients of the differences between the local plan and the international one. But it is usually retirees who have been hit by currency fluctuations that are looking at local plans. Professional ex-pats making a living there tend to look at international plans, particularly as they could be working in Singapore, then China and two years later in Saudi Arabia.
"They're professional enough to know they need a plan that will follow them around as their ex-pat life changes," he added.
This positive feeling is also illustrated by providers, who are not only talking up the sector but putting their money where their mouths are. DKV Globality and IHS are making some noise about their arrival in the market, while insurance giant Aviva has launched its own adviser targeted marketing push.
As Yvette Butterworth, corporate manager at ADVO Group explained, insurers are picking up on the perceived and expected expansion of the IPMI market in the UK as more and more brokers move to recognise this opportunity.
"A number of our clients in finance and law are experiencing growth in the Far and Middle East with new offices and new hires," she said.
"As more and more of our UK clients move into international markets, education of clients becomes increasingly important. A surprising number seem to believe that the use of their UK PMI with travel insurance is sufficient for sending ex-pats overseas.
"That means explanation of pitfalls, employee expectations and responsibilities can be so important," she added.
Rash of new legislation
A rash of new legislation affecting IPMI was tabled by many of the ex-pat heavy states last year, but the global economic recession meant much of this was shelved for fear of driving employers and their workforces away. However, it appears most of this new regulation was postponed, rather than scrapped altogether, with many in the industry expecting it to return as economic fortunes improve. And this red tape can leave brokers in an awkward position.
"I think the demand for international cover will grow, especially in the Middle and Far East but the number of insurers that can actually cover employees in these areas may decline due to the ever changing regulation," said Butterworth.
"Most of us are aware of the pitfalls of the Middle-East but what about closer to home? A recent client expansion into France begs the question, who is to pay the salary? If the French office pays is the UK IPMI invalid?
"There is considerable pressure on intermediaries to give the right advice," she added. Butterworth also suggested the time may come when UK brokers need to work with local counterparts to be able to write business in these areas.
Facing the challenge of negotiating these local intricacies is one of the main problems for IPMI providers. And according to Andrew Apps, director at ALC Health and deputy chairman of the Association of International Medical Insurance Providers (AIMIP), there is only one way to do that, to provide the best possible service.
"Where we have a growing population of clients we need to be on the ground so we can support them," he said.
"There's nothing better than being on the ground in a country, knowing the people, knowing the country, knowing the way things happen. It still amazes me how insurance companies in the IPMI market say they are international without offices outside their home market and without having staff that have never experienced what its like as an expat.
"We need as insurers to have experienced that life if we are going to provide the service we say we do," he added.
That is a task many insurers are already recognising as the number of offices around the globe, operated by UK providers, or run in partnership with local organisations is growing steadily. Apps is also able to shine some light on the need for eyebrow raising premium increases.
"Unlike the UK domestic market where there's an awful lot of competition between private doctors and hospitals, internationally that is less so," he said.
The only game in town
"If you go to Beijing, it is a major city, but they only have two or three private medical facilities that reach western standards. For anyone using those facilities, it is a case of ‘you accept our prices or you do not use our facilities.' Being the only game in town they can dictate the prices much more strongly, which makes it a lot more difficult for insurers to control the costs," he added.
So what does this mean for the sector in the future? Opinion is fairly unanimous that it is set to grow, but with Europe and the USA still struggling out of recession, it appears other markets are already taking the lead. Asia exited the recession early and so providers are reporting marked activity and new risks in the marketplace alongside organic growth within existing schemes there, particularly in Singapore and China.
But for Paul Weigall, group head of sales and marketing at Interglobal, Asia is not the only market being targeted for improved sales.
"We are trying to grow the market in Africa but it is quite immature," he said.
"It is more to do with them realising what IPMI is, rather than the domestic market. When people come to take out a policy they expect to pay x, and find out they have to pay y, and sometimes find that gap a lot larger than they expect.
"But there is a lot of opportunity there," he added. Weigall's ambitions do not stop on that continent however. He wants to focus a lot more on individual business, particularly to people around the world through the internet, targeting younger people and international students. These desires are partly driven by his acceptance that the UK group market is one of the most competitive in the world.
"It's very difficult to win large group business unless you are prepared to write it at more or less no profit," he said.
"We want to have a balanced book and in group business it is becoming more and more difficult to win new business, and margins are being squeezed, while the individual market has a more protected margin.
"Overall though the international market has great potential," he added.
So it seems this is a market that is universally expected to grow significantly. The question is, are you going to be a part of it?
