International rescue

An old t-shirt once parodied a military recruitment campaign with the slogan: 'Join the Army! Tour the World! And bring home all manner of embarrassing tropical diseases'.

Those working overseas these days probably do not worry to any great degree that they are venturing into the medical unknown, but they no doubt give due consideration to health issues. And within that important area of personal and family interest, they will be keen to secure good quality private medical insurance (PMI). The recent outbreak of Severe Acute Respiratory Syndrome (SARS) in several countries ' notably in the Far East and Canada ' can only have given the issue a higher profile.

Hong Kong in particular was severely affected by SARS. In terms of the medical crisis, there were 298 deaths and almost 1,800 cases of infection ' alarming numbers given the city's population of less than seven million. Economically, the impact has also been catastrophic, with many expatriates fleeing the region while others stay away, causing huge losses in businesses such as tourism, hotels, airlines and retailing.

With SARS seemingly on the retreat, it remains to be seen how quickly Hong Kong will recover in the broader sense. In its favour is the fact that, following steep economic declines in 1998 and 2001, the financial and trading communities were quickly restored to their former vibrancy. Hong Kong remains pivotal to the well-being of the burgeoning Chinese export/import economy, and the lure of that massive market is simply too strong for commerce to be deterred for too long.

Gaining stability

That said, other expatriate centres are developing in Singapore, Kuala Lumpur, Bangkok and in the Chinese cities of Shanghai and Beijing. Hong Kong will need to look to its laurels if it is to maintain its pre-eminence. In this it will be aided by the fact that its currency remains pegged to the US dollar ' something that provides much-needed stability in times of economic turbulence.

The market for international PMI is currently growing at around 15% per annum, and specialist intermediaries arrange the vast majority of business. Brokers who have only an occasional need to become involved ' perhaps on behalf of an individual who is being seconded overseas by his employer, or a commercial client that is opening a foreign operation ' can use such a firm to access the dedicated underwriting community.

With an estimated 140,000 people ' civilians, that is ' leaving the UK each year to work overseas, this is certainly an area of which all intermediaries should be aware.

It is not surprising then that the market for international PMI has been under the spotlight in recent months because of the SARS outbreak. As travel insurers advised policyholders not to travel to specified destinations and warned them that they would not be covered against the disease if they did so, medical insurers were naturally confronted with similar questions.

Limited impact

Most international PMI policies would cover the SARS risk, so there has been potential for a sharp rise in claims and a subsequent negative impact on underwriting performance, perhaps filtering through to higher premiums. That said, in most of the Far Eastern countries with large expatriate working communities, such as Hong Kong, victims of the disease were treated not in private clinics but in the public sector, where superior and tailored care was more readily available. This is one of the reasons why the actual impact of SARS on the insurance market is likely to be limited.

Hong Kong boasts public sector healthcare to rival most of the developed world, although it is only available free to expatriates with tax-paying resident status. People go private for the absence of queues and the flexibility to have treatment when and where they choose. The public sector remains the favoured option in emergencies. Therefore an expatriate might choose to give birth privately, but fall back on public provision if complications arose.

Notwithstanding SARS, other factors will continue to contribute towards premium increases. Medical inflation varies across the world, but it would be difficult to identify any country where it might be described as low. Generally, it is running at anywhere between 7% and 14% ' perhaps considerably higher in the US. So, while PMI remains an essential purchase, it must be bought with care and with an eye for value.

A major issue when considering the merits of international policies for people working in the Far East is the definition of hospitalisation - is it satisfactory to assume a local hospital will be used as required, or is it necessary to provide for relocation to another territory? For example, someone in Singapore or Hong Kong would no doubt be impressed by the quality of accommodation and care to be found and would have no reason to look elsewhere. Were they in Vietnam, however, their experience might be markedly different.

If evacuation to another country is to be allowed, should the policy offer only a limited number of options or should the policyholder be able to choose, including having the right to demand repatriation to the UK? Again, such matters are determined by the willingness to pay - the broker's task is simply to provide the information upon which a judgement can be made.

These issues certainly need to be explored before inception of the policy. It is no good discovering the limitations of the policy when the problem arises and there is a danger that expectations will not be satisfied - you do not want an aggrieved customer with a highly-infectious complaint forking out his own money to get home just to pay you a visit and discuss the matter. Current experience with other classes of business, such as critical illness cover and long term care insurance, illustrate how easily a gap can open between what the policyholder expects and what the policy actually provides.

Being aware

If there is a positive consequence of the tragic SARS epidemic, it is that those travelling abroad are more aware of the potential dangers associated with residence in other parts of the world. This will hopefully encourage them to pay greater heed to warnings, take greater care of their own health, and pay greater attention when their broker suggests a dedicated international PMI policy.

It is certainly the case that adequate and appropriate PMI cover is one of the essential facilitators of international commerce. And it certainly helps non-military personnel to return from their tours of duties free of embarrassing ailments. Indeed, once equipped with suitable cover, they can travel with confidence and fulfil their obligations without anxiety or distraction.

Tim Osborne is director of healthcare at Groupama Insurances and Martin Garcia is managing director of Goodhealth Worldwide