It’s been a tough six months for the group medical insurance market. As well as having to shift employees to homeworking, insurers and brokers have had to manage customer expectations when the private hospital sector passed most of its capacity to the NHS to help fight Covid-19.
With non-urgent operations and procedures postponed, there was a real fear that employers and employees might see they’d been fine without their cover and decide to cancel.
“We did worry that there might be this kneejerk reaction at the beginning of the pandemic but these fears have largely evaporated,” says Howden Employee Benefits & Wellbeing director of corporate consulting Cheryl Brennan. “Covid-19 has made employee health a priority: with the NHS coming under considerable strain, no one wants to take a gamble with their health.”
NHS waiting list predictions do little to assuage these health concerns. Even without the possibility of a second wave, the NHS Confederation has forecast that catching up with the backlog could see waiting lists in England increase from around 4.2 million now to almost 10 million by the end of the year.
Against this backdrop, the rush of cover cancellations that was initially feared has morphed into an uptick in interest in healthcare benefits. A survey by Consumer Intelligence on behalf of health insurance provider Equipsme found that while 15 per cent of respondents had considered paying for private treatment or insurance before the pandemic, this had increased to 27 per cent when the survey was conducted again in June.
It’s a situation that Gallagher regional director, reward & benefits consulting Chris Evans recognises. “A lot of organisations are reviewing their benefits in totality. Some will be feeling the financial pain, which could lead to cancellations or reductions in group size, but we’re finding that employee health and wellbeing is on everyone’s agenda, whether or not they’re under financial pressure.”
There’s also plenty of praise for the way the insurers handled the shift. “The insurers responded really well,” says Premier Choice Group managing director Claire Ginnelly. “Many added virtual GP, counselling and triage benefits to support employees during the pandemic and they were also good at offering payment holidays and rebates to employers. A few of our clients have cancelled due to economic reasons but the vast majority are resurrecting their policies.”
Steering employers through the next 12 or so months will be a key time for advisers explains Aviva UK Health managing director Steve Bridger: “It’s more important than ever that employers have access to advisers. Their expertise will help them find the health and wellbeing options that are right for them, whether that’s adding an excess or changing the benefits.”
The financial pressures that some businesses will be feeling could create a need for lower level products. “A diagnostics and virtual healthcare plan could help employees access NHS treatment more quickly, while giving employers a lower-cost option until they can upgrade,” she adds, pointing to plans such as Aviva’s Physiotherapy and Cancer Essentials and Equipsme’s range of products as examples.
Other advisers are more nervous about stripping out benefits. Marcia Reid, member of the executive committee at the Association of Medical Insurers and Intermediaries (AMII) and managing director of health and protection at Gallagher, explains: “I’m not a big fan of halfway houses. Cash plans are brilliant but if you start cutting back benefits on medical insurance, people get unhappy when they find out they haven’t got what they thought they had.”
Instead she would like to see a resurgence of a trend that has taken off during previous recessions. “Rather than giving employees a pay rise, businesses offered them benefits. Employees do really value anything that supports their health and wellbeing,” she adds.
While there is little doubt that there will be more interest in medical insurance, there’s uncertainty around how any claims catch-up will affect costs. After putting non-urgent procedures on hold, private hospitals are almost at full capacity again. “We’re back to around 80-85 per cent of pre-Covid-19 claims and this is increasing all the time,” says Bridger. “Some patients are nervous about having treatment but the hospitals and consultants are doing a great job at communicating safety.”
The slowdown in claims over the last few months has led insurers to offer rebates and return any excess profits to customers. While this has been well-received, Evans says there’s a degree of opaqueness around the dip and expected surge in claims. “Covid- 19 wasn’t factored into this year’s January and April renewals so we could see insurers giving a rebate and their revenue streams falling,” he explains.
“Then, over the next 12 months as people catch up on treatment, the insurers could be hit with rising expenses, resulting in large premium increases in 2022 that some employers won’t want to stomach.”
On top of this, there are fears about how four months of lockdown will have affected the nation’s health. More musculoskeletal problems are a possibility and there could also be an increase in cancer claims due to routine screenings and referrals being postponed. Figures from Cancer Research UK show that 2.1m people missed out on breast, bowel or cervical cancer screening as a result of Covid-19. This volume of screenings would typically lead to the diagnosis of around 3,800 cancers.
The potential rollercoaster ride that’s forecast for the PMI sector requires careful management. “We need to talk to our clients about how the next couple of years might play out,” says Ginnelly. “Products have a lot of added-value services that will come into their own as employers focus more on health and wellbeing.”
There could also be a need for different types of products. As well as the possibility of lower-cost options to help organisations that are feeling the squeeze, Evans believes there will be more interest in healthcare trusts and longer- term products. “There’s too much claims volatility in a 12-month window, especially at the moment,” he says. “Offering a two- or three- year term will give more stability.” And, with employee health and wellbeing firmly on the agenda, innovation may ensure that insurers and advisers are able to meet the needs of clients. “Employers are worried about absence, productivity and NHS waiting lists,” adds Bridger. “Now is not the time to be getting rid of healthcare benefits.”
A model of equitable distribution
Twenty years ago, tales of undercutting and lucrative distribution deals were relatively easy to find. But today, regulation and a shift towards greater professionalism has changed the group PMI landscape.
“Advisers have a grown-up relationship with their clients and the insurers,” says Gallagher regional director, reward & benefits consulting Chris Evans.
“It’s about adding value rather than driving everything down on price.”
His view is echoed by Aviva UK Health managing director Steve Bridger. “The intermediary market is a key and massively valuable distribution channel for insurers. We do have some business that goes direct, but it’s down to buying preferences. We have to be omni-channel to suit ourcustomers.”
Disclosure requirements and rules around treating customers fairly also mean a customer is charged the same premium whether they go direct or through an adviser. “There’s no incentive to go direct,” says Howden Employee Benefits & Wellbeing director of corporate consulting Cheryl Brennan. “They’ll pay the same and have more protection and support with an adviser. Corporate healthcare is too complex: it needs advice.”
But, while everyone says the market works well, there are some issues. Premier Choice Group managing director Claire Ginnelly says it can be frustrating when a broker rebates commission, forcing others to do the same to compete. “It’s rare,” she adds. “In the main the market works really well.”