The group PMI market continues to outpace the individual market. This pattern is only set to continue as more affordable ways develop for employers to provide the benefit to employees. The IFA's share of this market has grown considerably over the years -another pattern that is set to continue.
Recent figures from Laing & Buisson show the number of people covered by PMI or non-insured medical expenses schemes as 7.6 million or 12.8 per cent of the population at the end of 2002. Of the total, 4.71 million were in company-paid schemes and two million in personal sector schemes. In 2003, about £3.27bn was spent on PMI cover, including self-insured corporate schemes.
What happens within the NHS will obviously have an impact on the PMI market and, whereas at one time, problems in the NHS drove the private market, we may be seeing a turn-round in impact.
“The whole landscape is changing,” says Charlie MacEwan, head of communications at WPA, “Whether because the Government is offering contracts to private hospitals which the latter are accepting for significantly less than what insurers pay. There is definitely a downward pressure on premiums.”
More money is being ploughed into the NHS and it is anticipated this will amount to over £90bn by 2008.
But more is being asked for from the Government, in particular the incentive of tax breaks. “The Government can and should encourage individuals to participate with their own issues and to ensure a healthy and sustainable NHS,” says Jeremy Chadwick, group head of PR and communications at HSA. “Tax breaks for individuals and business for health insurance costs, gym membership and for corporate health and safety would be simple steps to help ensure involvement and awareness of health. These would also reduce demands on the NHS.”
Meanwhile the private market rumbles on through a combination of full PMI and health cash plan mixes and an increasing number of approaches to allow employers to curb costs and rehabilitate employees. IFAs are key to this market, according to Dudley Lusted, medical healthcare development, Axa PPP Healthcare. “The intermediary is critical to the whole process,” says Lusted. “The PMI market would not be there without them. Fifteen years ago, I would have said they were irrelevant but since then the market has moved from nowhere. IFAs are now fundamental to it. Part of the reason for this is the market has become more competitive. At one time you just had Bupa and PPP and nobody else and there was not much for a broker to do. Also brokers at that time didn't see the commission as a huge amount of money compared with say pensions. But as other insurers came through and the market became more competitive there was more for the broker to do.”
The drive to healthier lifestyles continues with such attitudes being encouraged in the workplace. Eighty-four per cent of people would prefer to work for an employer that supports the health and well being of its employers according to research earlier in the year from Standard Life Healthcare. It is perhaps not important this is no real philanthropic move on employers' part, as more of them are taking notice of what sickness and absence of employees cost them. That cost to UK business was £11.6bn in 2002, or an average of £476 per employee according to the CBI. Not surprisingly 90 per cent of employers say sickness absence is a significant or very significant cost to their organisation according to a survey carried out by the Chartered Institute of Personnel and Development.
The latest CBI/Axa absence and labour turnover survey 2004 showed 62 per cent of employers had a rehabilitation policy in place, an increase on 51 per cent in 2002 and 28 per cent in 2001. Access to medical and surgical treatment meant employers with long-term sick employees had absence levels of 7.4 days compared with 8.2 days for employers not providing this facility. More, however, needs to be done: “If we wish to reduce absence still further employers need to work with employees who have long-term conditions to assist them to return to the workplace when they are ready,” says Susan Anderson, director of human resources policy at the CBI.
One other area growing exponentially, according to MacEwan is healthcare trusts for big companies with more than 400 employees, where, from an insurer's perspective, the risk diminishes as the scheme gets bigger.
“What we are saying to employers is don't buy insurance because an insurer will add an administration cost and solvency/risk charge and then insurance premium charge, which can add another 20 per cent on top of the claims fund,” explains MacEwan, “Instead put the claims' fund in the bank, appoint an administrator who will charge you about 10 per cent and you are saving £150-200,000 per year on a million-pound policy.”
To this end, WPA has launched Protocol – an administration company subsidiary of WPA. The company has doubled in size each year for the past three years: “We are beginning to win some big customers and we need to convert some of our large customers as well,” says MacEwan.
The biggest advantage to intermediaries, says MacEwan, is they can control their own income because Protocol advises they charge a fee which is a percentage of the claims' fund, charged to the customer, which adds transparency. “Intermediaries are often doing a lot of work for very little commission and we are saying if you are doing the work then get paid for it,” he adds.
This is obviously another string to the broker bow. But there is a feeling in the industry that brokers are not promoting corporate healthcare trusts because they do not understand them. Some do not want to promote them because there are tax and legal elements which can be complicated and they do not want to be seen to be lacking in their knowledge in these areas. This could be the way of the market – it just might be worth intermediaries getting this knowledge to tap this income stream.