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Taking the strain

Rocketing private medical insurance premiums have been a difficult pill for consumers to swallow.

But some IFAs are now suggesting a move towards a stakeholder model for PMI that could provide a solution for those not eligible for company schemes and unable to afford individual plans.

PMI premium prices have escalated rapidly, largely because of the age difference between those now joining group plans who are of working age and therefore less likely to make expensive claims and the majority of those with individual plans who are in the older age bracket.

IFA firm Buckles Investment Services managing director Nigel Speirs doubts there is a viable way of reducing PMI premiums. He thinks the best option for those not eligible to join company health insurance schemes would be to wait and see whether other groups or organisations set up their own plans.

Speirs says: “Maybe the unions, for example, could offer the facility to set up large group medical insurance schemes on a similar basis to stakeholder pension schemes. We have some 12,000 clients and the take up on individual medical insurance plans is incredibly low. It is seen as a big and unnecessary expense.”

As a result of a particularly expensive personal claim, Speirs made a joint decision with Buckles Investment to change the private healthcare plan for the entire company. Speirs explains: “The people selling their plans are the low-cost providers but in my opinion these plans just do not meet the customers&#39 needs. There are just too many clauses in the cover.”

The Conservative Party&#39s response to a Labourstyle stakeholder PMI was revealed by shadow health secretary Liam Fox at the annual party conference last week. He announced tax breaks for people taking out individual cover and those paying directly for medical insurance.

IFA Best Advice partner Paul Banfield is firmly against a stakeholder-style PMI. He says: “I don&#39t think a stakeholder plan for PMI is viable. One of the most crucial aspects for setting up these plans is advice. The problem I have is more people could be left open to thinking they are covered when they aren&#39t. There are easier budget plans available.”

Banfield believes there have been so many advances in various areas of medical technology and treatment that clients need more advice than ever before. “People can&#39t go away and just read a brochure, they need individually tailored plans and advice. But I think people are definitely more interested in PMI.

“It is a growing area which is a very positive thing. They know the NHS does a good job in an emergency but there is always a &#39niggle&#39 over waiting lists and how long they would have to wait for minor procedures.”

Banfield estimates that around nine out of 10 of the people who consult him about PMI cover are surprised by how much an individual plan will cost them and by how inexpensive group schemes are.

The Beckett group specialist medical intermediary Val Carroll says she advises a large number of PMI group leavers who are coming up to retirement or redundancies who want to stick with their group plan.

Carroll says: “IFAs and intermediaries are more interested in group plans because from their perspective dealing with an individual&#39s PMI requirements means a lot more paperwork.

This hard work does not usually pay off as the client will quite often turn round and say that actually they are not interested as the premiums are higher than they expected – up to £80 or £90 a month.”

She believes the main advantage of being part of a group scheme, which usually has a minimum of 20 people, is cost. Employees will often be paying only tax on a scheme or only their dependants&#39 contributions.

She says another of the large benefits is underwriting. With group schemes, medical history is often disregarded. You often only need to declare recent medical care and it will exclude pre-existing problems for which you have received treatment.

Although IFA EZI UK limited managing director Kevin Morgan thinks there is certainly still a need and demand for PMI, he says: “With PMI prices outstripping inflation and then some, clients have their doubts. Once you&#39re over 40 there is a massive jump in terms of premiums. It&#39s monstrous. When people see the size of the premiums for an all-singing, all-dancing policy they really are shocked and I think this is why IFAs are increasingly reticent.”

Morgan says his firm actively encourages people to fund for PMI themselves and adds: “As much as the NHS is maligned it is not a bad service but it makes sense for employers to be able to plan for absenteeism.”

Charcol director financial services Roderic Rennison thinks the individual market has grown exponentially and will continue to grow.

He says: “It&#39s a waiting list issue – timing is the deciding factor. A lot of people would like to believe that the NHS will deliver and would be perfectly willing to pay additional tax for it, but they just don&#39t want to be left in pain with a non-acute condition left waiting on the NHS for 18 months.”

While British patients looking for a “quick” operation seem increasingly willing to go private and fly all the way to Greece or Germany for treatment, the future of private healthcare could be on the net. A variety of websites which let customers shop around for the best quotes for minor procedures like cataract operations, have sprung up providing a option.

Rennison says his clients are particularly interested in products that would cover them for non-urgent conditions like a knee cartilage operation but would finding it difficult to pay for it.

He often advises clients to looking at saving in an Isa to build up a lump sum to fund PMI themselves as a self-insurer, and says: “There are ways around the initial premium by using investment products to support initial expenses.”

IFAs think the PMI individual market is clearly moving towards more flexible products like the Standard Healthcare choices option based on three different pricing levels and the WPA protection strategy which pays out on a percentage not a fixed sum basis.

Western Provident head of communications Charlie McEwan says: “All we&#39re doing is minimising our risk by cutting spiralling premiums. There are several different options – providing managed care, high excesses schemes, menu of benefits. All of them are commendable but in the end they won&#39t work.”

He adds: “We are pinning WP&#39s colours to the shared responsibility option because we realise clients will use up to their limit – if they can – on an excesses policy.”


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