Too many PMI advisers’ reviews are just box-ticking exercises leading to identical cover says Stephen Jarrett, head of healthcare practice at Helm Godfrey
With the cost of healthcare increasing on a yearly basis it can be argued that the traditional approach of review and renew is not serving the interests of clients as well as it should. In order to ensure clients are provided with relevant advice the current approach to renewals needs to change.
Over the past few years the market has contracted as employers have sought to cut costs, through measures such as reducing levels of cover or imposing stricter eligibility requirements on staff to qualify for benefits. This, of course, has a knock-on effect for advisers, whose own revenues may have fallen as a result of clients reducing PMI spend.
In such an environment, it would seem logical that advisers would try harder to demonstrate their value by securing improved outcomes for their clients.
Yet in many respects the intermediary sector seems beset by a culture of inertia – the overwhelming mentality appears to be to renew on an existing or similar basis. In the current difficult economic conditions in particular, consultants seem happy to accept their fees or commission payments without questioning whether a PMI plan that was perhaps created more than a decade ago is still appropriate.
Such an approach is certainly not in the interests of clients, nor is it ultimately in those of the advisers themselves, whose services may eventually be called into question and dispensed with in favour of a more dynamic competitor.
So what could be done differently? Here we come to what is perhaps an unlikely example – mobile phones.
When you renew a mobile phone contract, the salesman will look at how many minutes you use, how many texts you send, how much time you spend on the internet, whether you make international calls and so on. Based on this information, you will be offered a tailored package that best suits your usage needs, perhaps something that is moderately or even substantially different from your last contract.
Much in the same way, advisers should be conducting thorough audits of policies, assessing claims history, workforce demographics, questioning whether certain elements of a policy are still needed and if the addition of new, potentially cost-saving features, such as open referrals, would be appropriate. They should also consider possible alternatives to PMI – cash plans or top-up policies for instance – and assess the latest market innovations and trends to see if such developments could provide improved solutions for clients. A better outcome does not have to mean reduced costs – with healthcare inflation running at 10 per cent to 12 per cent (depending on which insurer you talk to) achieving cost neutrality for PMI plans is a proving more difficult.
Arguably just as important as containing cost is service. PMI should not be treated in the same way as renewing life assurance and to an extent income protection, where limited product innovation occurs and cost is typically the prime consideration. Sometimes this distinction is lost during a review. Undertaking a full policy audit is time-consuming. Researching alternatives to historic policies and creating bespoke cover is time-consuming. Negotiating with insurers over developing tailored policies is time-consuming.
In order to gain an understanding of a client’s approach to health & wellness, any policy should ideally not be looked at in isolation but assessed against the client’s overall objectives and spend on all employee benefits. Insurers themselves could do more to embrace greater flexibility in how policies are designed. No two employers are the same; no two workforces are the same. Each is different and has very different needs and for PMI to be as valuable a benefit as possible – something employers feel they cannot dispense with – plans should reflect this diversity.
Doing this well requires specialist knowledge and experience. Advisers not already doing this should develop dedicated healthcare practices and bringing in staff with the levels of expertise needed to deliver such a service.
Advisers that do not review their renewal processes and where necessary adopt more innovative, progressive and holistic approaches may find they become increasingly marginalised as the market evolves. Clients deserve and are increasingly demanding bespoke plans and cover, created with the input of specialist consultants.
Insurers too must show greater willingness to work with advisers to create bespoke PMI cover. Such a co-operative approach would help reinvigorate the PMI sector.
The days of review and renew are on the way out and those advisers and insurers who recognise this and show they can move with the times will lead the way in driving future industry growth.