Owain Thomas talks to Claire Ginnelly about a difficult year for private healthcare, the impact of the up-coming election, claims clarity and the potential sale of one of the market's biggest players
As the annual results for 2009 poured in last month it became clear that something of a divide had opened between the health insurance and protection markets during the recession. While most protection providers had weathered the financial storm reasonably well, the private medical insurance (PMI) market suffered quite noticeably, with many insurers reporting dips in both profits and members.
Groupama Healthcare was one of those to feel the pinch, recording a 10% decline in overall business for 2009, however, with the economy slowly dragging itself out of recession and a positive start to the new year, Claire Ginnelly, head of business development for healthcare at the group PMI provider, feels there is a light at the end of the tunnel.
"We've had some contraction with members leaving our business as companies were scaling down and making reductions, but 2009 was also one of the best years for new business in a long time, and so far 2010 looks like its going in the same direction," she says.
"What we are finding is lots of schemes have suffered a reduction in membership, but we haven't had lots of schemes leaving us altogether. The new business side has been incredibly busy and what's also happening is a lot of re-broking because finances are tight for everyone and people are looking to get the best value for money.
Increased interaction
"All insurers are suffering the same thing, at renewal time we are getting more interaction with brokers asking us to reduce our renewal price, and obviously that's impacting on the overall premium," she adds.
With a general election looming, the NHS and its vast expense to the public purse appears to be safe from radical change with the main parties promising to protect its funding levels, but there are other changes that could be made to provide a shot in the arm to the PMI sector, and help reduce the strain on the NHS.
"The last and biggest Government interaction in the PMI sector was a negative one with the removal of tax relief for over-65s," Ginnelly explains.
"That didn't affect us as we are not individually orientated, but if the tax relief came back on the individual side that's going to generate more interest in PMI, and anything that generates interest in the PMI market can only be a good thing. Having said that, with the state of the economy as it is, the chances of it happening are quite slim."
And if there were to be any future cuts to the NHS, how would that effect private healthcare?
"I don't think there will be any immediate impact, as for example, when there has been a very long waiting list on the NHS side we haven't necessarily seen a spike in the growth of PMI," she says.
"It will be interesting though if the Tories get in, as they've made noises in the past about a partnership with the private sector, more so than Labour have. If there is more partnership between public and private sector then we might have to re-think the way we work, because at the moment we compliment the NHS, but if you have a Government that wanted to change things quite fundamentally - such as some sort of top-up option as in Europe - then how the PMI market operates would have to change fundamentally."
Bug-bears
"But it's going to take a brave government to change it so fundamentally," she adds.
As much as they might like to have some say in the final decisions, these external factors are largely out of the control of those in the PMI sector. But there are issues within the industry that cause concern and frustration to clients, brokers and providers alike. For Ginnelly (and many advisers she's spoken too) one particular irritation surrounds the lack of claims clarity, whereby at renewal, the present insurer withholds the claims data of the scheme to those involved in competing for the renewal, often excluding the company which is covered as well.
It's clear this is more than just a minor annoyance, as she passionately describes the process as "unfair" and "baffling."
"We bang on about it at every possible opportunity and probably drive the other insurers mad, but we're not going to stop doing it because we absolutely 100% believe that in this marketplace, claims experience should be shared," she says.
"And from a TCF point of view it should be shared, because when renewing a policy the provider will look at the claims made and this will have some influence in the premium. We think its totally unfair that a provider can present renewal terms which, for example, increase 40%, and not say why they are doing it. How anyone can sit there and say ‘we're increasing your premiums' and not tell you why...it baffles me.
"I don't understand how insurance companies can operate in that way, but at the moment they still do," she adds.
Ginnelly ensures that Groupama does practice what she is preaching, as the provider reveals the claims data of schemes covered at renewal time. But when pressed about who holds the key to stopping the process, despite discussions with the FSA and Association of British Insurers (ABI), it is advisers who she, perhaps surprisingly, identifies as the key players.
"I think if we get the AMII (Association of Medical Insurance Intermediaries) or BIBA (the British Insurance Brokers Association) to take some action that would be incredibly powerful," she says.
"The brokers are not happy with the situation, and if they demonstrate that unhappiness by actually trying to do something about it that would be the most powerful thing to do, as apposed to the FSA coming along and saying ‘you've got to do this'. We are talking to various bodies because we absolutely believe that it's in the clients' and industry's best interests that this information is shared. For those who don't share claims data it's about hanging onto business, and the two main players are the main culprits in this as they have more to lose than anyone else.
"We could take that attitude too, that by giving out this data it puts us at risk of losing good business and just keeping the bad business, but in our experience that's not what's happening," she adds.
Cancer
Another hot topic in the PMI world has been that of cancer coverage. With new and more expensive treatments developing faster than ever there has been a lively debate within industry circles about the best way to address what is a serious consideration for members. Some providers have taken to offering exclusions or cover restrictions to limit costs for both insurer and scheme contributor, but this has sometimes lead to uncertainty over coverage, and some cancer charities have made criticisms regarding a lack of clarity on the issue. Ginnelly hopes that Groupama's plain English award for its leaflet about the disease will eliminate any confusion, but does admit that offering a cancer exclusion from their present full coverage may be considered.
Looking to the year ahead, Ginnelly suggests there could be a shake-up in the sector, with Standard Life Healthcare rumoured to be up for sale.
"They are a big brand in the market and speculation is rife that they are going to be up for sale, so that will be one to watch this year," she notes.
"It will be interesting to see if we get a non-PMI player coming into the market and looking to buy it, or whether an existing PMI provider wants to buy it. But whatever happens, if it is sold, there will be quite a lot of change in the market from that."
One of the more popular announcements for the coming 12 months has been the new AMII/CII PMI exam. This, Ginnelly is very supportive of, and despite having passed previous PMI qualifications already, she will be taking the exam herself.
"I think its fantastic, a good idea for brokers, and even better if we have it ourselves," she says.
"Anything that raises standards within the PMI market is a good thing, and I think the AMII are doing a really good thing with it. Something else I hope they continue to do is work with BIBA.
Together they've set up meetings for insurers and I've found those really positive with all the main players in the market sitting round the table discussing issues and trying to find a common way forward.
"If it was just one or the other it probably would not have happened," she concludes.
As with most things in life, let alone the PMI industry, it all seems to run so much more smoothly when people sit down and talk.
