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Gym’ll fix it

PruHealth sales director Dave Priestley says PMI providers must move towards incentives for a healthy lifestyle

Two years ago, few people saw the PMI market as an opportunity. Rising medical inflation – growing by 4 to 5 per cent above the retail price of inflation – was pushing up costs for providers.

Premiums were rising fast and many customers were starting to pull out. What is more, the economics of traditional health insurance meant that customers had little incentive to take any preventive measures to improve their health but when they did need treatment, they wanted it with all the bells and whistles on with no account of cost.

The only people who saw value from their PMI policies were those who were unhealthy and expected to claim and the industry was caught in a vicious circle of high claim rates, spiralling costs and rising premiums.

Insurers tried to overcome these problems in a number of ways, for instance, using strict underwriting to control adverse selection, co-payments or risk-sharing with providers or cutting back on cover.

However, while these measures go some way towards cutting the cost to insurers, none really serve to make things more attractive to the customer.

Although the costs may be brought down, it is often at the expense of cover or it relies on the customer paying for at least part of their treatment.

None of these measures is likely to attract any new customers to the market because they do not improve the value for money equation – and the lack of new customers is bad news for brokers.

The aim of the private medical insurance industry should be to reach the ideal of reduced costs, increased access and best-in-class cover – and it is possible.

Given that we know a large and growing part of healthcare costs in developed countries are the result of avoidable disease, we believe the success of private medical providers in the UK lies n tackling this.

Why not give policyholders incentives to manage their health more effectively and then reward them with lower premiums when they do?

Why not develop a PMI product which encourages people to get healthier to bring down their risk and premiums without compromising cover?

For this model to work, an insurer would need to provide members with subsidised access to preventive goods, such as health screens, stopping smoking courses, health and fitness clubs, removing the financial barrier which prevents people from activities to improve their health.

The insurer would need to offer financial incentives based on engagement in healthy activities and ensure monitoring on a voluntary basis to encourage people to take responsibility and engage with their own health. Finally, the model relies on giving customers a premium refund, which depends on the efforts they make to look after themselves, as well as not claiming – so they see value in keeping themselves healthy.

Products which work in this way move the debate away from sickness and instead towards health and wellness. They help to expand the market, both in terms of customers and brokers, as they are popular not only with people who have always bought PMI, but also to those who have not traditionally been seen as the product’s target audience.

Partnerships with gyms, health spas and healthscreen providers which offer customers big discounts are of huge value to many people so it makes the product appeal to a wider market and makes the sale a lot easier for brokers.

PMI was previously a fairly niche market because people do not like to talk and think about sickness. However, lifestyle and wellbeing are different as they are big, topical issues. People love to talk about their health and wellbeing and are prepared to spend significant money on improving it.

In the long-term, this model should benefit not only those willing to live a healthy lifestyle but also those who have no interest in doing so. This is because the more healthy-living low-risk people in the pool of customers, the lower the risk for the total pool and the lower premiums are for everyone – even for those who claim.

Prevention is better than cure and the health insurance of the future recognises that and has built it into the design of the product.

The ABI recently issued a statement of best practice for selling PMI. This outlines all the things that a customer should expect from the provider and broker from which they are buying a policy. Its primary focus is on the information needs of customers when they are trying to choose between the various policies on offer.

However, in the future, best practice could also include a lifestyle element, that is, which product is best suited to a particular lifestyle? For someone who is active and is willing to engage with his or her health to bring down premiums, a customer-engaged healthcare policy may well be best.

As well as benefiting a healthy person this lifestyle model would also greatly benefit a person with a medical condition, for instance, high blood pressure, but who is managing it with a healthy diet and exercise.

I believe the future of PMI lies in this consumer-engaged model. Increased access, reduced premiums, and best-in-class cover. It is the PMI equivalent of having your cake and eating it although in our business, maybe it would be better described as a healthy snack.


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