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IFAs hold the key

Chancellor Gordon Brown&#39s cash injection into the NHS was expected to

restore confidence in the health system and potentially hit the

private medical insurance industry hard.

Instead, more people and businesses are signing up for PMI than ever

before and the market is buoyant.

The latest ABI figures show that over 6.5 million people have PMI

either through their employer or an individual policy compared with

6.1 million five years ago. Together, they are ploughing just under

£2.5m into the industry, with annual premiums averaging


As expected, the biggest increase – up by 8 per cent from 2000 to

2001 – was businesses buying private health cover for their staff.

According to the ABI, employees cite private health cover as the

second most popular benefit after company pensions and employers have

caught on that it is in their interests to look after the health of

all their staff to prevent absences from work.

Bupa director of sales and distribution Steve Flanagan agrees that

the PMI industry is dominated by schemes taken out by employers. He

says: “Company-paid schemes make up around 70 per cent of the PMI

market at the moment. Employers are extending the reach of PMI by

offering it to a lot more of their staff rather than just senior

managers, as in the past.

“This means that the insurance is available to a far wider audience.

At the same time, the company-paid schemes are taking individuals

out of the market, so as the company scheme&#39s market share has

flourished, cover taken out by individuals has depleted. It has

shrunk by about 3 per cent each year for the last few years although

it is levelling out now.”

Standard Life Healthcare product development manager Matt Foster says

there are signs of change in the market despite the dominance of

company-paid schemes.

Foster says: “There is bound to be an increase in the number of

individuals who take out medical insurance because the industry is

beginning to realise that it needs to tailor products towards

self-employed people to attract their business, for example.

“To do this, there are now products which offer to pay an agreed sum

towards very expensive treatments such as hip replacements, heart

operations and treatment for cancer. These products do not cover

smaller treatments so it costs less than comprehensive cover but they

do give some security on costly treatments should an individual need


There are also schemes that, in effect, work like a loan. If a person

needs an operation, the provider pays them a lump sum to cover the

costs and the cash can be repaid monthly.

RJ Temple group development director Laurence Houlden says on the

whole, it is little wonder that so few individuals take out cover as

the industry does not market itself well.

He says: “I am not convinced that the message about PMI has reached

the masses yet. It is still seen as a luxury product and when you

consider the state of the NHS system, that is odd. Perhaps it is the

fault of the industry as it is not promoted well. It still tends to

only be high-net-worth clients who want to take out the cover. The

cashback schemes are a lot more affordable now as they cover fewer

treatments, so they should be promoted more.”

Providers would like to see PMI products promoted through IFAs so the

industry can spread the message to a wider audience. Providers are

already seeing an increase in the number of individual policies

bought through IFAs.

Flanagan says: “For IFAs, there is a big opportunity to promote PMI

products to individuals as many people do not know how or where to

buy them. We are already seeing growth in PMI products in the IFA

market. For pro-viders, the cost of distribution of individual cover

is expensive but IFAs have already got client bases to appeal to.

IFAs are not generally harnessing this market and I would be a lot

happier if they would forge stronger links to enable this to happen.”

But when it comes to individual cover, the industry does not help

itself by producing complicated products, according to IFAs. Company

schemes are well set out but the individual market is not easy to


Holden Meehan adviser Simon Bonnett says: “It is a shame there is no

standardisation when it comes to individual PMI products. It is hard

to compare what is on offer from different providers. As an IFA, it

is difficult to make recommendations to clients, even when they do

want the cover. Unlike critical-illness policies, where you can see

the premiums for core conditions, there is no standard of cover for

treatments, so all products have different advantages and


“For example, some offer aftercare service and often the treatments

are hard to compare. If an IFA recommends one product and it turns

out that it does not cover their client for the treatment they

eventually need but another product would have covered them, there

could be cause for comeback on the IFA. A lack of standardisation

does not help the individual PMI market.”

The short-term future of the PMI market depends on the economy as PMI

is generally seen as a luxury product. If the situation in Iraq is

not resolved soon, providers are worried that this will have a bad

impact on PMI take-up.

However, Flanagan says PMI is essentially all about jumping queues.

He says: “There is lots of talk about how much has been spent on the

NHS but the public is waiting to see if it really does improve the

level of healthcare. There is a potential further loss of confidence

if the NHS does not improve this year. This will help the PMI market

because the whole reason why people buy PMI is so they do not have to

wait for treatment.”


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