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Take the medicine

With NHS waiting lists at over one million there is a lot of consumer interest in private medical insurance, particularly among the corporate sector.

Although individual PMI sales are down by 5 per cent since 1997, corporate sales have increased by 1.2 per cent, according to analysts Laing & Buisson. The research shows that since 1990 the number of company-paid subscribers has grown by around 11.5 per cent compared with a 4 per cent decline in other PMI demand. The total PMI market is now worth £3,071m and at the end of 1999 three and a half million people were subscribers.

Intermediaries account for 42 per cent of PMI sales, writing around two-thirds of their PMI business with companies.

Most PMI business is written in the South-east. Together with London, the region accounts for 43 per cent of the market. Penetration in Wales and Scotland is very low at 4 per cent for each. The reason for this is partly these regions&#39 relative lack of wealth and, in the case of Scotland particularly, the fact that a lower population density puts less pressure on public health services, resulting in shorter waiting lists.

Who provides PMI and what is covered? In June 2000, there were eight provident organisations and 14 commercial companies selling the products. Most are members of the ABI.

Private medical insurance corporate plans pay for treatment for acute conditions and do not cover primary care or chronic conditions.

Acute conditions are those that come on rapidly and can be treated with a view to curing them. Chronic conditions are those that cannot be cured, such as diabetes and asthma. Acute episodes of chronic conditions, such as a hip replacement or heart bypass may be covered. Primary care means services provided by a GP. Some PMI schemes also provide for dental care.

Big group schemes usually cover pre-existing medical claims, which smaller schemes exclude on grounds of cost. The next article in this series will give more detail on the kinds and costs of PMI cover available but it is worth noting that, with increased taxation and pressure on premiums pushing up the cost of the benefit, many employers have responded by reducing benefits, covering fewer dependants, restricting choice or asking employees to pay a proportion of each claim (co-insurance). They are also asking insurers hard questions about the way their PMI schemes are being used and the size and type of claims received.

Some insurers have responded to the demand for cheaper products by developing hospital networks, with lower prices charged in return for higher throughput.

Voluntary, employee-paid schemes are also popular, with a third of organisations offering PMI operating on this basis. Employees generally benefit from cheaper premiums than they would do individually.

How should an IFA go about choosing an insurer? These are some points to consider:

Does the PMI provider show that it values its relationship with intermediaries?

Does it have its own direct salesforce resulting in possible conflicts of interest?

How do commission rates compare with its competitors?

Does it offer a wide range of PMI products?

What are the provider&#39s IT systems like? Will it provide timely detailed claim reports and analyses?

Are claims settled quickly?

Are free mailshots, training and exhibition packages offered on the products? For very big schemes, the insurer should visit the workplace and explain to benefits personnel or employees what the policy covers and how to claim.

Will the provider&#39s marketing approach dovetail with the intermediary&#39s?

PMI will continue to be an important resource for many. Many pundits believe providers will increasingly provide more screening, more alternative therapies and preventive treatments on top of the traditional products.

A product of the future could be the portable PMI scheme, matching the personal pension scheme. Such a scheme would fit into the changing work patterns we have seen over the last decade or so.

Improved technology means communications and admin should be streamlined, with great enhancements to customers. Long-distance diagnosis by sending tests to specialist centres of excellence to get fast and accurate results is already starting to happen.

Interest in fully integrated benefit products, tailored to both the organisation&#39s and employee&#39s requirements, is likely to continue to increase over the next few years.

A recent survey showed that one in five employers is prepared to spend more on healthcare. IFAs could have much to gain by exploring the possibilities of the market and in the following articles in this series we will take a closer look at the products available and the way that consumers, particularly organisations, are using them.

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