In focus: SME private medical insurance

The small company sector of the PMI industry has always been a competitive one, but the past year has been particularly fierce. Edmund Tirbutt carries out our annual overview of broker and provider SME sentiment.

The economic turmoil of the past year has ensured that the SME private medical insurance (PMI) community has only one word on its mind: “price”. Even employers who have been loyal to insurers for many years have been tempted to switch to achieve 5% premium savings.

Kevin Amphlett, chief executive of national specialist intermediary Chase Templeton, says: ”Price is the number one driver in the decision-making process as long as cover is comparable, and our rate of rebroke has risen by at least half during the last year. Some of our larger clients have been involved not just in asking us to shop around providers but also in requiring us to participate in beauty parades to reappraise our services.”

The ultra-competitive environment has led to insurers receiving a marked increase in quotation requests. Groupama Healthcare, for example, reports that it has been getting between 20% and 30% more requests from the same number of companies. There have also inevitably been accusations that some of the more competitive insurers have been indulging in loss-leader pricing.

Mike Blake, compliance director at national specialist intermediary PMI Health Group, says: “I struggle to see how quotes from some of these players can prove sustainable, so I wouldn’t be surprised if they hardened rates once they’ve got the business on board. It is therefore important that intermediaries make clients aware of this possibility.”

Most accusing fingers point at Aviva Health UK, which has achieved new business growth of 5% during 2009 on SME business – in terms of the number of lives covered – when most competitors have experienced new business decreases(see box on page 24). Nevertheless, the company refutes any suggestion that its pricing is irresponsible or unsustainable.

Nick Reynolds, head of intermediary sales at Aviva Health UK, says: “We wouldn’t be allowed to indulge in pricing that didn’t make a profit. We are delivering profitable growth and expect to produce higher profits for the whole of our PMI book during 2009 than we did during 2008. We used to have two price increases a year but we now have only one, in April. In 2009 this saw our premiums rise by only 5%.”

But the grouse of the year award undoubtedly goes to the markedly increased practice of employers using more than one intermediary to shop around for the same PMI scheme. Some intermediaries report that as many as a third of their renewal cases now involve having to compete with other intermediaries.

There is general agreement that the practice is something the field could do without as it rarely benefits the client. Most insurers quote the same prices to all intermediaries – although there are the odd cases where intermediaries are able to obtain advantageous terms through special distribution deals with some insurers.

With the majority of insurers now offering modular policies which enable employers to pick and mix elements of cover there is inevitably a temptation for intermediaries in competition with one another to cut back on the actual level of cover they are offering in order come up with seemingly the most competitive quote.

comments powered by Disqus