A move from broking towards true consultancy can help grow your PMI business – and that, says Sam Barrett, will probably involve using a more diverse range of products and services
With yet another increase in insurance premium tax announced in this year’s Budget, nobodyexpects an improvement in the lacklustre fortunes of the group medical insurance market.
However, as employee healthcare becomes increasingly important to employers, there are plenty of opportunities for intermediaries to grow their business.
A number of factors are driving employee health up the workplace agenda. As well as the increase in health risks associated with an ageing workforce, the NHS is showing significant signs of strain, with longer waiting lists and difficulties accessing GPs having implications for employers.
“The wellness revolution is coming,” says Punter Southall Health & Protection commercial director Stuart Scullion, who is also chairman of the Association of Medical Insurance Intermediaries.Some organisations are already there but, over the next five years, the pressure will increase on employers to take responsibility for their employees’ health and wellbeing.”
Dropping the price
Against this backdrop, moving away from broking the medical insurance scheme to providing consultancy services makes business sense. Aon Hewitt principal Rachel Western says the traditional broking strategy of focusing on price can only end badly.
“If you sell on price, everyone gets the least out of it,” she says. “You can chase around the market but ultimately you will end up having to pay the true price.”
Although competition among insurers has enabled brokers to snag some good deals in recent years, consolidation in the market means that finding a cheaper home for a scheme will become less likely. Explaining to an employer why a premium that has barely moved for years has suddenly jumped by at least a fifth will not be an easy task.
Western adds: “You need to focus on the root causes of the price increase, identifying the health risks and finding ways to address them. Do it now, before the scheme gets priced out of
It is not easy to switch from a price-focused conversation to one that is more about the employer’s health and wellbeing strategy. But Western says the key to making the shift is having the right conversation with the right person.
“If you’re talking to the HR department, talk about employee wellbeing to appeal to the supportive side of this role. But if you speak to finance, your focus needs to be on the cost savings that a health and wellbeing strategy can deliver,” she says.
Aviva UK Health PMI sales director Nick Reynolds agrees, saying employers must focus more on the return on investment.
“Medical insurance can look expensive but, if it helps an employee get back to work quickly instead of spending months waiting on the NHS, that’s a huge benefit to the employer,” he says.
Having this more strategic conversation will usually involve talking about a much broader range of health and wellbeing products. This could include everything from more traditional insurance such as cash plans and employee assistance programmes through to more unusual ones like fitness campaigns and healthy menus.
Precise recommendations will vary between organisations. “Find out what the firm’s trying to achieve and match products to this objective,” says Axa PPP Healthcare intermediarydistribution director Paul Moulton.
“Medical insurance has its place but there may be more effective ways to support a firm’s health strategy.” For example, where medical insurance is provided as a perk to the senior management, the organisation may realise a greater return by rolling out across the entire workforce benefits such as a cash plan, simple health checks and some wellbeing initiatives such as a steps challenge and nutritional advice.
Many medical insurers too are bringing out products to suit these new customer bases. For example, Axa PPP Healthcare’s low-cost AccessHEALTH focuses on musculoskeletal conditions, mental health and a virtual GP service to enable employees to access treatment quickly for the main causes of absence.
Similarly, although designed for the individual market Aviva’s Cancer Essentials could be a cost-effective way to support a broader health and wellbeing strategy, while MetLife’s ProActive
Protection offers EAPs and wellness solutions to pro-mote employee resilience.Taking this broader approach can also change the way the employer views these benefits. While many employers think only of the rising cost when considering their medical insurance scheme, their focus changes when they link together all the health-related initiatives, according to Western.
“It becomes much more about the benefits the strategy delivers,” she says. “Health risks are one of the largest expenses employers face. Controlling these will make a big difference to the value an employer gets from a health scheme.”
There are also benefits for the adviser’s business when developing a health and wellbeing strategy with a client, with relationships becoming much stickier. But there are potential downsides too.
Reynolds says: “The results in the early days can be a bit alarming. Often you’ll see a spike in claims and absence because the strategy picks up medical conditions earlier. But this is only temporary and the scheme will quickly start to deliver benefits in terms of lower absence and greater productivity.”
Even without adding a full range of health and wellbeing initiatives to one’s product portfolio, taking a more consultancy-type approach can pay dividends. Co-chairman of Protection Review Andy Couchman highlights the benefits of contacting clients now rather than waiting for renewal.
“Take the initiative and use the recent announcement of an increase in IPT as an opportunity to speak to clients,” he says.
“No one likes bad news so prepare them for a price increase. This looks more professional and also enables you to demonstrate value by exploring options to keep the premium manageable.”
These options could include many of the standard cost-containment mechanisms, such as excesses and benefit caps, but could also include recommending different products.
“For example, Couchman says running a cash plan alongside a budget medical insurance scheme can be more attractive, especially where the workforce is relatively young and claims are low.
“These are very different animals but the employer and employee don’t really care how benefits are delivered,” he adds. “As long as they like the benefits they get and are comfortable with the impact on their P11d, they’re happy.”
Larger schemes can also benefit from different funding mechanisms, such as a healthcare trust or one of the lighter options like WPA’s Corporate Deductible or Axa PPP Healthcare’s Master Trust. Moulton expects these to become more popular.
“With IPT increasing again, a trust arrangement will become a more compelling arrangement for more employers,” he says. “It’s definitely worth brushing up on this area of advice.”
As well as being of interest to advisers pondering whether to swot up on medical insurance, this type of introducer arrangement can be an option for specialist intermediaries looking to grow their book of business.
Business can be passed both ways by building relationships with other advisers that they trust, ensuring the client gets specialist advice across the range of products while both parties increase their revenue stream.
Another option for firms looking to increase their size is acquisition. This can often add a new area to the business. For example, when Punter Southall acquired PHP, it was looking to move into the SME market, where PHP was particularly strong, says Scullion.
“There are plenty of ways to build and reinvigorate a business,” he adds. “And, with so much change likely in the corporate healthcare market over the next few years, now is a great time to consider your business plans.”
While challenges in the market mean many medical insurance intermediaries are sharpening their business practices or branching into new areas, other advisers are being encouraged to sell more medical insurance.
“There’s a misconception that medical insurance can be sold only by specialists,” says Aviva UK Health’s Nick Reynolds. “We’re working with IFAs and general insurance brokers to encourage them to look at medical insurance and help grow the market.”
Others such as Axa PPP Healthcare are taking a slightly different approach. Rather than provide training to advisers to enable them to sell an occasional medical insurance scheme, Axa offers a system that allows advisers to pass any leads on to it.
“Our PASS system allows advisers to refer leads to us, safe in the knowledge that we’ll deal only with that area of a client’s business,” says Moulton. “In addition, if any business comes out of it, the adviser will benefit from a revenue stream.”
It is also possible to pass leads on to an intermediary. Scullion says this model is in place at many of the larger intermediaries, including PHP before it was acquired by Punter Southall.
“We had a massive number of introducers, rather like a quasi-network, who would use us as their trusted partner for medical insurance business,” he says.
“Because we specialised in health, we could go in and protect their business interest by offering an independent service. It works well.”