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In focus: International PMI

The international PMI industry has been characterised by optimism and confidence over recent years but insiders are bracing themselves for new challenges in a tougher global economic climate. Edmund Tirbutt reports

December 2008 Features

The credit crisis, as the UK government is ever intent on reminding us, is very much a global phenomenon. Nevertheless, the international private medical insurance (PMI) market has remained surprisingly unscathed to date.

Experts commonly volunteer growth rates for the last year of around 20% to 25% for the field as a whole, and the figures estimated by some individual companies are more spectacular still – over 150% in the case of Morgan Price International and 45% for InterGlobal. Even Bupa International, which is the largest player with over 800,000 customers, expects to achieve double digit sales growth for 2008, and this should by no means regarded as a steady or average performance because the sheer number of new customers it is acquiring overshadows other providers growing from much smaller bases.

There is no shortage of provider spokespeople who point out that international PMI has proved remarkably resilient during previous global economic downturns and who feel that a worst case scenario is likely to amount to no more than a 5% fall in growth. They emphasise that good quality healthcare while working internationally is seen as essential by most employers and is highly valued by those on overseas assignments, and that the increased use of direct billing is enabling expats to access care more easily and with increased frequency.

Similar optimism in the individual market is supported by research demonstrating that huge numbers of people are disillusioned with life in the UK and would prefer to live elsewhere. Survey results released this October by Bupa International found that almost three quarters of expats were concerned about the economic downturn and, in particular, the negative impact of currency fluctuations. Forty per cent were affected by falling property prices and over a third were concerned about the impact that the credit crunch will have on their pensions. Nevertheless, over three quarters believed that their lifestyle is better in their new country of residence.

AXA PPP healthcare reports a 15% rise in the number of enquiries it has received for international PMI during the first half of 2008 and believes that the number of people leaving the UK could exceed 500,000 this year. The company’s enquiries data suggests “Britain is increasingly a nation of wannabe expats” and that many people are now considering new destinations like Bulgaria and Cyprus to take advantage of cheaper living costs and better weather.

Carl Carter, managing director of IMG Europe, the insurer, says: “As the UK economy slows down it is predicted that many UK PMI policyholders may save money by lapsing and falling back on the NHS, but there has never been a better time for brokers to get involved with the expat medical insurance market, which used to be a niche but is now one of the fastest growing sectors of the insurance market in its own right. In most parts of the world the insured need to maintain their cover as there is no local state system to fall back on when money gets tight. Additionally, although some economies may be slowing down, brokers can market international PMI via the internet to other regions across the world.”

David Pryor, senior executive at MediCare International, another insurer, says: “Working patterns are likely to change in response to the threat of recession in many countries and I expect to see salaried staff being laid off both in the UK and in key markets such as the Far East as companies react to the new economic realities. But these changes should present opportunities for ski l led UK staff looking for new challenges. When unemployment has risen in the UK in the past it has so often been accompanied by a rise in expatriates seeking work abroad.

“This time around we expect the pattern to repeat itself, with small numbers of specialist contractors looking to fill skills gaps in the now dominant manufacturing and related service industries of the Far East and Middle East. This new working model will also impact upon the way in which healthcare policies are taken out. People will still need to travel overseas for work, but they may no longer have healthcare as part of their package of benefits, particularly if they are working as contractors. With healthcare costs rising, it is vital that employees and contractors alike are properly insured.”

The provider optimism is also endorsed by some specialist intermediaries. Newcastle-based Medibroker, which focuses primarily on individual business, and national employee benefit consultants Jelf Group, which deals mainly in the corporate market, are both adamant that they have experienced no slowdown in demand at all as a result of the global economic downturn.

NOTES OF CAUTION

Conversely, however, Glasgow-based specialist intermediary Essential Healthcare, which deals primarily in individual business, reports that its enquiries for international PMI have fallen by 15% to 20% over the past two months.

Brian Mulreany, sales director at Essential Healthcare, says: “I have a feeling people are battening down the hatches and waiting to see what happens as the credit crunch unfolds. They may express a desire to go abroad when they have just returned from their holidays but once they have been back for a couple of months they often realise it’s an impossible dream and that they can’t afford to give up their job or manage to sell their house.”

Simon Ball, head of UK global benefits practice at national employee benefit consultants Aon Consulting, is also notably cautious and feels that the international PMI field as a whole could experience negative growth as a result of the credit crunch. But he is unusual in expressing the view that the current growth rate is nearer 10% than 20% because a lot of companies are achieving business growth by globalising existing plans.

He says: “Companies are currently coming out of personal accident and travel policies with a limited PMI element and into proper PMI plans and it is not really new business. At the moment the credit crunch is actually giving us more work as people are trying to globalise PMI provision in order to cut costs but in the medium term I expect companies to stop sending so many employees overseas and I feel that some of the smaller providers could be vulnerable.”

Even some of the more bullish commentators acknowledge that although PMI is likely to be one of the very last things expats cut back on, no product or service can be guaranteed to be totally immune from the economic downturn. Customers are therefore likely to demand better value and the onus will be on both providers and brokers to help them make the most of tighter budgets.

Jon Carpenter, managing director of Morgan Price International Healthcare, the international PMI provider, says: “Across our business we are seeing no real slowdown in the number of companies expanding overseas, and existing customers who are already overseas are also expanding by recruiting more staff, but it will be a testing time in the international arena during the next 12 months. The effects of the credit crunch will be felt all over the world and it is those providers and brokers who can react the quickest and offer relevant products that will survive coming out the other side of this unprecedented period.

“We think we will start to see a greater demand for lower level products among the expat community, who will see the need for the cover but may be reticent about the ever increasing premiums. There is no doubt that with increased regulation in all parts of the globe the insurance world is tougher and more complex, but our view is that this helps to level out the playing field between the standard of insurance products and advice available from one country to the next. This is therefore a good thing for the industry and hence for the customer.”

This increasing trend for local governments to regulate international providers and protect their local healthcare systems from being over-burdened by large communities of expats living and working within their markets is likely to intensify in 2009. In particular, there is the expected introduction of tightened regulations in Dubai, following on from those in place in neighbouring Abu Dhabi.

Tim Slee, global sales director at Bupa International, says: “We can expect more international providers to seek out partnerships with local players in order to access important markets for expats, and the challenge for insurers and intermediaries is to keep pace with the speed of regulation and to be compliant.”

OTHER NEWS

All this would seem guaranteed to put off domestic PMI intermediaries from entering the international market for the first time on the grounds that they simply do not have time to keep abreast with regulatory developments in all corners of the globe. But fortunately this is not proving to be the case and the much needed influx of new intermediary involvement is beginning to materialise.

Most beginners are realising that the easiest way of dipping a toe in international workers is to tie themselves with one insurer rather than attempt to give whole-of-market advice. This way they can simply rely on the regulatory expertise of the insurer concerned.

Ron Buchan, chief executive of Allianz Worldwide Care, says: “We are definitely seeing more first time IFAs and more general brokers starting to seize opportunities and we are even noticing that some intermediaries are selling international plans to UK clients because of the broader cover. The ability to have cover for GPs and for chronic conditions is particularly valued and I expect to see domestic insurers starting to include these features. The cover is certainly more expensive but people who want it tend to have more money.”

Also of potential benefit is a trend in the direction of removing families from corporate cover. This can have a welcome impact on curbing costs in a field where medical inflation is already in the region of 12% to 15%.

Mark Coleman, director international sales (UK) at CIGNA International Expatriate Benefits, says: “Once a posting to Paris or Brussels would have made locating the whole family an automatic decision, but now the availability of both Eurostar trains and affordable flights has made commuting possible. Married couples and family groups can make six or seven times as many claims as single people. Employees tend to be healthier than dependants and there is usually an element of screening in the assignment process. The fact that employers know their staff also means that they can understand and influence the risks that assignees present to their business, but they don’t have any such control or influence over family.”

China, where Allianz Worldwide is currently developing a locally admitted product through its Chinese subsidiary Allianz China, remains one of the major growth areas but the quality of local healthcare facilities also continues to present significant problems.

Aon Consulting’s Ball says: “China doesn’t have the full infrastructure for delivering health to Western standards so insurers are often trying to fly people to Hong Kong and Singapore. These are high cost areas and the evacuation process is expensive as well, so cost problems are developing. Insurers are putting pressure on authorities and providers to build new hospitals and higher quality networks but it will take many years before this actually happen. So this will always be a barrier to growth in China for the foreseeable future.”

Most other news relates to Africa and the Middle East. InterGlobal has been expanding its business in Africa generally, Allianz Worldwide has noticed increasing enquiries from Libya, Angola and Algeria, and this May William Russell launched in Dubai in partnership with local insurer Dubai Insurance Company.

Morgan Price International has specifically refocused its business to target the Middle East and Africa in particular and has spent the last 12 months strengthening its ties with local partners to enable it to have locally licensed products available in Bahrain, the UAE (Both Dubai and Abu Dhabi) Saudi Arabia, Libya, Kuwait, Oman and Qatar. It reports that it has seen a huge amount of interest from local and international brokers in these products, and has written business worth well over US$3m in the last 12 months alone.

Otherwise, areas considered to be of growing importance tend to be singled out by no more than one provider. For example, Expacare is experiencing increasing enquiries from oil rich areas like Kazakhstan and Azerbaijan, and InterGlobal has joined forces with BaoViet to sell in Vietnam. William Russell is experiencing increased demand in Indonesia, especially from expatriate mining specialists, and it reports that expats are entering Malaysia on the Malaysia My Second Home (MM2H) programme – and are obliged to have international PMI cover before a visa is granted.

An absence of acquisition and merger news since the acquisition of Goodhealth Worldwide by Aetna Global Benefits in September 2007 has almost been matched by a lack of genuine product innovation – although it has been Aetna Global Benefits itself that has come up with one of the most significant pieces of product development news (see box below). Essential Healthcare’s Mulreany says there has been a “startling lack of innovation and imagination” from product providers while underwriting can be “pretty shoddy”.

Credit crisis or no credit crisis, if even half the innovation that has been demonstrated in the domestic PMI market could be translated into the international PMI arena the growth rates achieved by international players could make the step up from being spectacular to mind boggling.

BIG HITTING VANBREDA SEEKING UK BROKER PARTNERSHIPS

Recent months have seen Belgium-based insurance provider Vanbreda International step up its efforts to engage with UK brokers and compete for the business of their multinational clients, writes David Sawers.

The appointment of Kevin Melton (pictured) as deputy director responsible for market development is a clear sign that Vanbreda is hoping to work more with British-based intermediaries as it looks to build on its 300,000+ membership base.

Melton joins Vanbreda from Allianz Worldwide Care, where he was head of international sales. He says the launch of the provider’s ExpatPlus product line earlier this year is just one element of Vanbreda’s ambitions to increase its market awareness in the UK.

According to Melton, Vanbreda is well-established in the international government organisations (IGO) arena. IGOs are organisations such as the International Monetary Fund and the United Nations which, Melton says, can be even more demanding than private sector organisations.

“We deal with organisations that don’t have shareholders, but they are indirectly funded by taxpayers,” he told Health Insurance. “So we obviously have to demonstrate massive financial stability.”

Vanbreda is now also looking to exploit new regions and new commercial, corporate opportunities. As a result, Melton will report into Vanbreda director of international benefits Wouter Reggers as the provider develops a team of European sales managers, including one dedicated to the UK broker market, throughout 2009.

Melton said: “IGOs will remain core as they are the bedrock of our business but we want to diversify and look to corporate opportunities.”

Vanbreda is also keen to work with domestic UK insurers that do not have an international offering, he says. If those providers want to offer a white label product, Vanbreda would consider working with them to develop that.

Vanbreda International • Established for over 50 years • Over 350 employees • Offices in Belgium, The Netherlands, Luxembourg, Germany, Malaysia and China • Serves over 310,000 plan members on a 24/7/365 basis across 192 countries • In 2007 processed 3.4 million medical bills, totalling €375m in reimbursements

2008 PRODUCT NEWS

In September Aetna Global Benefits started offering products and programmes to EU based multi-national corporations and their employees on international assignment – alongside a full array of Goodhealth Worldwide products for all sizes of company. Aetna has created tools and information specifically for globally mobile populations including a 24/7 international service centre and a passport protected member website but, as far as intermediaries are concerned, the main attraction is that European companies now have access to facilities such as disease management and maternity programmes that are not normally exported from the US.

This October Expacare brought out an umbrella scheme that offers medical history disregarded cover terms for schemes with between one and four employees – although employees must not have had heart or cancer conditions and all scheme members must have the same level of cover. The moral hazard issue is largely avoided by the fact that no-one is likely to decide to go to the trouble of working abroad just to make a medical claim and the chances of companies sending employees who are very ill overseas are slim.

Singing from a similar hymn sheet, in July MediCare International reduced the size of group scheme that qualifies for medical history disregarded terms from 20 to 10 members, and in May William Russell launched an enhanced plan for companies with more than 20 expatriate employees which allows pre-existing medical conditions to be covered in full.

In August William Russell also launched its Global Health Bespoke plan, which has increased flexibility for employers with over 50 expatriate members by enabling them to design their own benefit structures, and the following month it introduced moratorium underwriting for all its health insurance plans.

In January Bupa international launched five new health insurance plans specifically designed to meet the needs of people living in Latin America and the Caribbean who want cover for treatment at home or overseas. Three months later the company extended its cover for chronic conditions for all its Lifeline customers, who are now covered for drugs, consultations and treatment to control conditions such as diabetes, asthma and hypertension.

In July Bupa International also launched the European Health Plan, a new policy to provide people living and working in new EU countries such as Bulgaria and Romania with access to PMI tailored to their needs. It includes cover for chronic diseases like diabetes, worldwide emergency travel and the facility to add dental and optical cover.

In February InterGlobal entered into partnership with security experts red24 to provide 24/7 security services and solutions to ensure that policyholders are prepared for the unexpected. Those who buy or renew their plans from this year have access to red24’s security services as a standard part of their plan. A hotline gives members round-the-clock access to a red24 personal security adviser wherever they are in the world.

In January InterGlobal also augmented its plans with new benefits focusing on wellness and wellbeing, including cover for hormone replacement therapy, treatment of allergies, increased benefit levels for maintenance of chronic conditions and extended cover for restorative dental treatment.

In July IMG Europe launched MediGlobal International as a result of the increasing regulation, restrictions and market changes in the UAE. Aimed primarily at expats and high net worth locals who are resident in the UAE, the product is available both to individuals and corporate groups with more than two employees. It is underwritten locally by Al Wathba National Insurance Company, a leading nationally licensed UAE insurer, in partnership with IMG.

In January IMG Europe also launched Ping An GlobalSelect Group, a new group international healthcare insurance product for the Chinese expat market. It allows tailor-made quotations for larger groups and, for smaller groups of two to 24 employees, it is based on a simple rating matrix and allows the broker to calculate group quotes quickly without having to submit them for individual underwriting consideration.

This October, Vanbreda International launched ExpatPlus, offering both individuals and companies a choice of three levels of cover across two geographic regions. Zone A cover is worldwide while Zone B excludes the US and Canada except for 90 days of accident and emergency cover. ExpatPlus offers comprehensive cover with a sliding scale of benefits for each of the main three options.