Health insurers must offer Value policies

Getting individuals to see the advantages of private medical insurance and persuading them to buy, has always been hard. In these dark times it is harder still.

But much of the problem is of perception. Potential consumers presume policies cover most in-patient and out-patient treatment. Over the years, insurers have competed by adding more cover to policies to compete with each other, so that some covers are very wide. Insurers have also stressed the importance of full cover for all the family.

The more extensive the cover the more expensive the premium. Some insurers disagree with the main market and offer limited cover or high excesses or co-insurance. Others have developed new ideas, some of which are simple, others so complicated that you need a degree in nuclear physics to understand what they do or do not cover.

To be fair, some insurers have moved away from the all-inclusive policy to one where you can build it up from various sections. This is popular but does require some work from the customer.

Insurers could learn from supermarkets that have aided cash-conscious customers by offering Value ranges of products. This was initially derided by consumer groups but has proved immensely profitable for supermarkets and money saving for customers.

Some of the supermarket products are simply rehashes of existing products, most are new. Many health insurers already have limited cover products that are good value. But even those that do are often scared of being honest and fall back into their comfort zone of promoting the full cover products, while reluctantly offering limited cover ones.

Supermarkets have been clever. They accept that many people want to save money but still buy good products. The real trick is that they have made a clear distinction between better own-brand products with a slightly higher price, and lower price ranges with poorer content. The latter Value ranges are whizzing off the shelves, compared to branded or conventional own-brand ranges.

The trick is both in perception and in honesty. Supermarkets accept that many people want or need to save money. Customers have much less hesitation in admitting they have to save money.

Some insurers have the Value equivalent within their PMI range, others do not. So, to insurers with Value PMI products, clearly label these products as Value ones, and explain why they are cheaper and make it easier for people to buy them. On some websites searching for these products is like navigating Hampton Court maze. Some have fancy names, if you want to keep the name fine, but only within a Value range. Insurers offering only full covers need to add Value products.

When people have less money to spend it is the more expensive products that come under pressure. Insurers should find out what their customers really need. They must also change the way they position products. There is a place in the market for limited cover Value products as long as consumers understand what they are and are not covered for. People know they will not get BMW quality if they buy a Kia, so insurers need to move away from their fear of limited cover.

To insurers who are too proud, too afraid of intermediaries comparing like with like and moaning about less cover, or who are too slow on the uptake -  why not offer Value products?

Insurers and intermediaries need to speed up the process of product development to a matter of weeks rather than years. Forget the focus groups, the pilot studies, the massaging of the bruised egos of the sales staff and intermediaries who whinge at any change, the inter-departmental rivalries, and what competitors are doing.

Insurers still argue that customers value comprehensive health insurance because it covers all eventualities and total peace of mind. But to be brutal about it, fewer and fewer can afford that luxury. PMI has always been a product of the better off, partly due to the way it is sold. You are never going to get the poor or unemployed to buy it, but to the average family squeezed between higher outgoings and lower income, trying to save for a rainy day, to price them out of the PMI market because of some outmoded view that full family cover is what really matters, is short sighted. 

There are  many ways to save money; higher excesses, co-insurance, shared responsibility, six-week waiting, lower limits, excluding cancer cover, restrictions on choice of hospital, no-claims bonuses, healthy living discounts, pay direct, and specific illness covers. All have their advantages and disadvantages, but they all make it very hard for consumers to compare policies and providers; or work out what route is a Value one.

Confused customers do not buy. Most businesses are finding that the good easy years when people bought anything on offer have gone. Consumers need to be sold good products at fair prices. They only want features that are actually a benefit, not window-dressing. 

Times are tough, so insurers need to speed up how they introduce and change products. Insurers that stand still will suffer. As yet, PMI has escaped the full effects of the economy, but on other health insurances we are seeing some providers and products quietly vanishing.

To quote Gordon Ramsay, “It is not about how much money you can make, it is all about surviving. To do this businesses must find new ways of offering value for money to customers. Innovate or die.”

We need Value polices which customers can understand and afford now, not in 2010.

Health Insurance Hot Topic: 19/03/2009