People who already have PMI value it highly but there is significant under-penetration of the market at a time when personal and family health is a key priority in life and reform of the NHS will undoubtedly create opportunity.
Rising claims and premiums present a tough challenge. We need to tackle this in a smart way and avoid falling into the trap of crude cost control measures which simply erode the value of the product to the extent that customers no longer see the benefit of it.
The future for PMI is not about offering the same for less but about finding ways to offer more cover, benefits and more value while managing the cost of claims in a more sophisticated way which is invisible to the customer.
We have seen a number of blunt cost control measures emerge over recent months. Fee maxima (which effectively restricts the amount consultants can charge insurance companies), compulsory networks and open referrals (which can limit where patients are referred for treatment), cover restrictions and benefit exclusions and limited follow-up care, are increasingly common tactics as a means to control healthcare cost inflation.
While these initiatives are obviously viable options to present customers with a range of alternatives to suit different budgets, it is critical that the trade-offs inherent in these choices are made crystal clear to customers. Too often we have seen customers complaining that they were not made aware of “small print” exclusions or limits to the level of reimbursement for consultant fees.
In addition, we should not use these options as a way of giving up on developing products which offer the full cover that we know customers value so highly in an affordable way.
Indeed, the voluntary nature of the PMI purchase necessitates solutions that favour extended cover and higher payouts over declining cover and diminishing innovation.
As the economy begins to stabilise and the opportunity for private healthcare opens up, now is the time when the industry should be investing in the value of PMI products. Traditional PMI benefit design only provides value to extremes of the population – the sickest 20 per cent of the population account for 80 per cent of healthcare costs – which is why the market has failed to grow its appeal beyond 10 per cent of the population over the last two decades. That leaves a significant under-served population that sees little value from PMI policies.
PMI providers need to up their game and deliver value by ensuring that their products offer some genuine value for all their members, not just those who claim or are already participating in wellness activity.
Engaging this underserved majority is the key to success. Lifestyle benefits and incentives, if used well, can play a key role. Helping people to understand their health, making it easier and cheaper to get healthy and rewarding them for their efforts can drive behaviour change to help improve the biggest causes of mortality rates and manage the claims risk of this segment of the population into the future.
Offering incentives to promote healthier lifestyle by rewarding people for not smoking or providing a managed programme to help clients tackle problems such as obesity by combining medical treatment with wellness, dietary and psychological advice are two ways that show how end-to-end management of lifestyle-induced morbidity and improving healthcan be achieved.
As well as appealing to customers, the PMI market must capitalise on the increased prospects coming its way so that intermediaries and professional advisers see it as an attractive proposition for their clients.
There is no doubt that customers can benefit significantly from good quality advice on their choice of PMI provider and that advisers are well placed to articulate the value PMI offers.
In light of the RDR, some professional advisers may be looking to diversify their product offering and business streams and there are opportunities to open up a new market through flexible commission structures and making it as easy and attractive as possible for intermediaries.
As an industry, we need to arm them with the tools they need in order to provide expert, focused advice and show that PMI is a growth opportunity to be considered by creating highly differentiated products which offer a much broader appeal than traditional PMI products.
There is some debate around whether price comparison sites pose a threat to the adviser market and whether they will become a major force in the individual PMI market.
Many advisers believe that these online mediums will not impact their business in a major way in the foreseeable future. But if price comparison sites see a demand, they will increasingly exploit the PMI market rather than simply refer customers to intermediaries, as they do now.
If advisers focus solely on price comparison, they will lose the battle as comparison sites can deliver this service, faster and cheaper. Advisers must hold their ground by demonstrating the value of their advice and expertise by showing what products can deliver to customers and not simply focusing on price.
Few customers genuinely understand the value that some of the more innovative PMI products now offer which is where this expert advice is critical to ensure PMI is seen in a different light. The time has come for insurers to develop more flexible products and offer value for money. If we are to grow the PMI market, we need to ensure premiums are affordable but increase the product value.
There are smart ways to achieve this; managing claims and premiums through wellness, managing consultant charges by identifying and tackling excessive chargers behind the scenes, while continuing to guarantee freedom of choice and full cover to customers.
New benefits need to be added that reflect modern society and up-to-date health issues such as Bariatric surgery.
It is increasingly important for organisations across all sectors to create more added value for their customers. PMI needs to appeal to a wider customer base, be relevant for today’s consumer and give something back to consumers even if they do not claim.