The private medical insurance market continues to face cost challenges. The number of UK residents with cover fell from 12.4 per cent to 11.1 per cent between 2008 and 2011, reflecting the economic downturn.
However, the PMI market is in a position to take advantage of recent developments if it is prepared to look at things in a less conventional way.
PMI has become a harder sell for brokers and intermediaries targeting cash-strapped consumers and businesses. Now is the time to look at how to secure new business without restricting choice and commoditising the advice process.
NHS reform is around the corner and many fear the Government’s controversial changes will result in longer waiting times and restricted access to treatment, so this is one area that could create opportunities for PMI.
However, providers should be cautious about relying solely on the traditional arguments about the weakness of the NHS when promoting PMI to customers, because improvements in the NHS in recent years have rendered them much less powerful. If people are satisfied with the NHS, they are less likely to seek alternatives. It is also risky to base strategies on dissatisfaction as the current situation may turn out to be a storm in a teacup.
Fortunately, there are alternatives. Product innovation centred on wellness is the key to shaking up a market in need of reform. The time has come for insurers to develop more flexible products and offer value for money. It cannot continue to churn the market and sell on cost alone.
As the wellness industry grows its appeal, PMI can take advantage of this to ensure stable, well managed premiums. It can also help break the cycle of cutting product value to slow increases in premiums.
Encouraging wellness is a strategy being adopted all over the world by public and private sectors. More effective preventative measures and fundamental lifestyle changes are being promoted to encourage healthy behaviour.
Patients are also being encouraged to take more responsibility for their own healthcare – and this is where PMI can play a key role. The market can invest in changing behaviours and look at how individuals can be incentivised to look after their own health. By managing costs, it is possible to increase the value associated with PMI by adding new benefits with a wider appeal to consumers.
It can develop offerings to break the boundaries that limited traditional PMI. New-generation products will give great PMI cover and add value. Encouraging people to engage in healthy behaviour will benefit customers and could result in cost savings through lower claims over time.
PruHealth’s own research shows a clear link between people who engage in consistent healthy behaviour and lower hospital admissions. Only by adopting this new approach can we begin to drive market growth.
It is becoming increasingly important for organisations across all sectors to create more added value for their customers. The insurance market – and PMI in particular – needs to appeal to a wider base, be relevant for today’s consumer and give something back to consumers, even if they do not claim, through benefits related to wellness activity.
Advisers must focus their advice around what products can deliver to customers rather than price. In today’s online world, consumers can do their own price comparisons but very few genuinely understand the value some of the more innovative PMI products offer. This is where expert advice is critical. By making wellness the key, we could see a radical reform of PMI as customers see it in a different light.
In the future we should see a more sustainable approach based on delivering valued advice on differentiated products with appeal beyond the confines of traditional PMI, supported by consistent pricing and level commission. This may require some extra effort but it is the only way to ensure customers get the certainty they desperately need in these uncertain times.