Spoilt by choice

Do we need more choice in the PMI market? It can be a double-edged sword says Debbie Kleiner-Gaines, managing director at Best Health UK

The word “choice” is muttered frequently at the Best Health offices; something you would expect from any independent adviser.

Specialist PMI intermediaries would cease to prevail without enough market and product choice and I can’t help but feel unease at the PMI market shrinkage, most of which is due to insurer consolidation. We are keen for innovation in this sector from existing or, even better, newcomers to the PMI market. I would applaud another ’Prudential’ developing their version of ’PruHealth’ but I imagine that the average non-specialist adviser feels there is enough choice in the market.

Many IFAs will write a PMI policy only when asked. I know only a relative handful of IFAs that are experienced enough in PMI to be able to compare the market for their client and all too often I hear stories of clients being offered Hobson’s Choice.

When I first started working with IFAs, I noticed that if they had already set up a PMI policy for their client, more often than not it was placed with Standard Life, now Pru-Health. Either way, the client would usually end up with a PMI policy that had not been compared with the rest of the market.

Looking in more detail at the PMI insurers in the market, the last 10 years has seen a huge shift to more “options” based policies. Throughout this recession it has been useful to offer clients alternatives from their existing insurer to help reduce premiums at renewal. We now have the flexibility to, for example, remove psychiatric cover or therapies or impose an outpatient limit.

This is especially important where a client cannot switch insurer due to, for example, an ongoing cancer-related claim. In previous recessions, we wouldn’t have had these choices to offer clients. The downside of too much choice is that clients can find it very confusing. However, a good adviser will conduct a thorough enough fact find to help them build a plan for their client without having to present too many confusing choices.

Many IFAs will write a PMI policy only when asked. I know only a relative handful of IFAs that are experienced enough in PMI to be able to compare the market for their client and all too often I hear stories of clients being offered Hobson’s Choice

While I believe choice is good for the client, it can be difficult for advisers when comparing policies. A recent review we conducted for a client insured with PruHealth left them having to choose between a plan that had been heavily used for its subsidiary benefits, against a plan without this option which was a lower cost. The financial director had a difficult job telling his staff that they would no longer obtain their Cineworld or Eurostar discount. However, we had presented a 25 per cent saving with another insurer that offered similar medical benefits but without the aforementioned discounts.

The PMI market wheels have been slowly turning and trying to come up with a palatable solution to reducing premiums whilst still offering quality cover. Recently, cash plan provider Westfield Health launched a product promoted as a low cost alternative for quick access to private surgery. Cash plan providers seem to have spotted the opportunity for the middle ground that some companies are looking for.

Bupa has created a lot of discussion and controversy by introducing its Open Referral scheme. Many feel it is very risky to take away the freedom of choice of the customer or their GP to choose their own specialist. Whether Bupa have made a sensible move remains to be seen. I don’t think Open Referral would ever be accepted by individual clients, but with corporates and larger SMEs, why not?

Where the employer is paying the premium, their motivation is usually for their employee to get better quickly and get back to work. Do they care if their employee sees the consultant their GP recommended? Do they care if they get a discount on their Eurostar or Cineworld ticket for that matter?

Interestingly, GPs don’t always know who the best specialist is for their patient and OFT research showed that some base referrals purely on social contact. Bupa would be very sensible to consider the Open Referral system as another price reduction option rather than forcing customers into a scheme they don’t necessarily feel comfortable with. I see the Open Referral concept as a potential sea change which could be picked up as the norm by other insurers. However, it has to be embedded slowly so that the changes can be embraced by the customers.

In summary, each PMI insurer itself has more choice amongst its range of plans than ever before and this has only been widening over the past 10 years. I hope that in 2013 we will be welcoming some new insurers to the market and that our market leaders continue to innovate and pave the way for PMI to thrive.