As sales of individual private medical insurance continue to decline, some providers and advisers suggest the industry has let IFAs down by its lack of investment in new technology.
Figures from the Association of British Insurers (ABI) earlier this year revealed the number of individual PMI subscribers fell to 1,012,000 in 2005, reflecting a declining trend since the late 1990s.
Online PMI provider Health-On-Line believes the reluctance among IFAs to recommend such policies is not the fault of IFAs themselves, but is down to the industry’s lack of investment in new technology which could help simplify the product.
Mark Martin, managing director of Health-On-Line, believes the traditional barriers to intermediaries recommending PMI to their clients are threefold:
- Intermediaries believe PMI is generally complicated;
- They find it difficult to get quotes and submit business; and
- They fear the risk of ‘getting it wrong’, which could lead to claims being declined and dissatisfied clients.
He suggests the fact many providers still use a paper application process is partly to blame for the perceived barriers, and claims the ability to quote, submit and track business electronically on Health-On-Line could bring the barriers down.
George Connelly, partner at Health Care Matters, says PMI insurers are behind most other insurers in developing technology and the majority do not yet have the facility to submit applications online.
But he says PMI insurers are taking steps to remedy the situation and suggests it could be a different story in two years’ time.
In addition, Connelly says new products coming into the market mean IFAs need to keep up to date with developments if they are to sell PMI policies efficiently and knowledgeably.
Likewise, Simon Firmin, life and pensions adviser at Plan Insure Limited, says PMI is deemed to be very complex and he suggests unless IFAs are experienced in the business and recommend policies frequently it is difficult to keep up to date.
He states: “PMI is complex because of the variances in cover between one provider and another, such as whether travel and dental cover are included and what the limits are. The level of benefits is more complex than critical illness (CI) cover so advisers need to dig deep to make a comparison. The circumstances in which a claim can be made are also more ambiguous than CI, which makes it more time-consuming.”
In addition, Firmin says the remuneration for advisers is not as good with PMI as it is with products such as CI – the commission is not as high and it tends to be paid on a level basis rather than upfront.
Jon Stewart, director at PMI Independent Financial Advisers, says PMI is relatively low down in the priority list for a typical client because there is not a huge demand from consumers and it is not very lucrative for IFAs.
Furthermore, he says the market is a very sophisticated one and the apparent lack of analysis tools and other software means IFAs have to spend a lot of time researching PMI to try and understand it.
Claire Ginnelly, head of intermediary sales at Standard Life Healthcare, agrees there is a perception PMI is complex, but she claims in reality it is not as complex as IFAs think it is.
She suggests this view is down to a lack of knowledge about the product, which makes IFAs who have traditionally focussed on other types of insurance steer away from it.
She adds: “Things are changing but IFAs need training and close attention for them to understand it. We get a lot of business from IFAs and this is probably because of the support we’ve given them.”
Ginnelly admits the PMI industry as a whole is behind the rest of the insurance sector in developing technology, but she believes the industry has recognised this and is looking at putting more business online.
She states: “At Standard Life we’re focussing on what we can do going forward. We currently have an e-policy servicing system for group schemes which gives IFAs access to schemes online and enables them to print off reports, confirm renewals and remove or add members. We are looking to develop our proposition going forward.”
Damian Lenihan, manager for key intermediaries at Bupa, says he has not seen a reluctance on the part of IFAs to recommend PMI, as 15% of Bupa's business is through IFAs.
In the future Lenihan says the industry might see more IFAs either getting involved in PMI themselves or passing it onto third parties who specialise in PMI to convert the business for them.
Have your say: Chris Clee, group pensions director at Pavis FM, says:
Whilst our company has never written a great deal of PMI business, in the last twelve months it has become impossible. Why?
- The premiums at BUPA and other companies have increased massively over the last three years;
- The business is now regulated and we cannot justify the compliance required to analyse all of the different options and match these to our clients’ needs. We could work on a commission basis and receive commission at 5% of the premium, which, in most cases, doesn’t cover our costs. Or we could charge a fee which would push up the cost to our clients still further, and
- To get round the compliance problems, we decided last December to join the PMI Club. We heard nothing until April. Then we were told that the delay was due to problems setting up the agencies with Axa PPP & Norwich Union. So now we can use the system excluding those two. But obviously we can’t as they are major players in the market and as IFAs, we can’t just ignore them.
So we don’t advise on PMI any more.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
First mentioned in Cridland Report
Second acquisition of 2019
Guy Opperman has rejected calls to speed up changes to auto-enrolment (AE) despite increasing pressure to boost contribution rates and overall savings pots.
Four key areas to focus on
And 94% for critical illness