One of the key debates this year has undoubtedly been healthcare. From the media frenzy during the flu crisis at the start of the year, to the postcode lottery for treatment and the NHS plan in July, healthcare has been major news.
However, some IFAs have not yet grasped the nettle and seen healthcare as a fundamental part of financial planning.
The typical private medical insurance customer profile is traditionally firmly in the sight of IFAs. They tend to be socio economic group ABC1, self-employed or more mature(45-65 years old).
Currently, 1.2 million people are covered, generating an annual premium income of over £163;1bn. We estimate that, despite the market being relatively static over the past decade, around 150,000 new policies are generated each year. Around 60 per cent of these are new cases and the remainder are switched from other providers.
It is also estimated that 70 per cent of people buy direct, which suggests that IFAs are losing out as their customers buy elsewhere.
In our research with IFAs earlier this year, we found that they tend to deal with PMI reactively. Part of the reason was they find PMI a complicated arena and have diffi culty comparing products.
It need not be so. There are three basic types of PMI cover – budget, standard and comprehensive.
Budget cover usually concentrates cover on the treatment and recuperative process only.
Standard cover includes limited access to pre-treatment diagnostic services, such as consultations as well as cover for the treatment and recuperative process
Comprehensive policies cover diagnosis, treatment and the recuperative process.
IFAs need to translate the peace of mind that PMI provides into the key motivator for buying this type of protection. This is no different to the process for advising on other products.
For example, if a customer is in the family lifestage, protection will be key. They are likely to want fast access to diagnosis and treatment but, as the customers tend to be younger and healthier, standard cover products offer the closest fit to their needs.
For a single, older person, peace of mind could mean fast access to treatment. A budget scheme might be a suitable proposition.
For the self-employed, the issue is likely to be spe edy resolution and a quick return to work. Comprehensive cover for the complete process from diagnosis to post-operative recovery may therefore be the most suitable solution.
What is often overlooked when PMI is discussed is the value of the cover. In 1999, the industry paid out over £163;1.7bn in claims for nearly 1.3 million claimants. That means more than one in five PMI holders made a claim at an average of £163;1,300 each. Clearly, this is an interactive insurance where clients feel a tan gible benefit.
Healthcare is an inherent part of personal financial planning, particularly in the area of savings. While most people do not tend to segment their rainy day money explicitly, many customers will use it to pay for healthcare treatment if necessary.
The growing market for self-pay private healthcare supports this. There has been a 40 per cent rise in the number of people opting to pay for private surgery since the current Government came to power in 1997.
In 1999, 160,000 people paid for their operations. The most common self-pay procedures are those most likely to be suffered by the older generation – cataract rem-oval, hip replacement and heart surgery.
PMI can work for the IFA in this area too. Using a scheme with a high excess gives the opportunity to position PMI to the customer as stop/loss cover. The customer takes the risk of small consultation bills and routine treatment costs but, should more complicated treatment be required, the insurance cover would kick in, thus preserving more of their savings.
There are prime opportunities for IFAs to capitalise on healthcare among their existing client base with relative ease. Adopting the principles of knowing the customer and segmenting on lifestage and need, provides the oppor tunity to package healthcare as part of a financial planning solution.
After all, if you are talking to your customers about savings, healthcare is likely to be on the rainy day list, making it a topic you should be discussing under best advice.
Taking a more proactive approach to PMI can reap rewards in extra earning potential and a sound reason to rev isit a customer each year.