Is it time to update and review your private medical insurance ?

When I tell people the fact that I am about to revealm most of them do a kind of intellectual double take and exclaim, genuinely .... “Surely Not !”

This fact is probavly one of the least understood by the public about the financial services industry.

Here’s the fact :

INSURANCE COMPANIES TRANSACT BUSINESS, WRITE POLICIES ON THEIR CUSTOMERS LIFE TO MAKE A PROFIT

Now that this staggering piece of information is out there in the public domain I would like to examine it a little bit more.

Let’s start by getting one thing clear, a lot of the time I don’t like insurance companies too much. As an independent healthcare specialist intermediary I have the luxury of choosing which of the insurers is the best for my clients and then I have the problem that a lot of the time they go out of their way to make my life and therefore that of my clients as difficult as possible. Not on purpose I’m sure but the very fact of their bureaucratic ways, underwriting rules and product foibles can make my life infuriating. This blog post however is not going to be a rant about insurers. Far from it. I am going to actually try and explain why they do certain and things and how it gives us the opportunity to help you, the customer get a better deal.

So if I may I would like to return to my central thesis - insurers need to make money.

I know some people resent this (and given poor advice to customers in the past and multiple mis-selling scandals within the insurance sector I think this feeling is toally understandable) and feel that insurers should pay for everything regardless of whether it is covered or pre-existing or excluded or eligible (pick your favourite technical exclusion term from the list). But in the end just like your corner shop or Tesco or Barclays Bank or that bit of selling you do on Amazon to top up your salary the insurance companies need to take in more money than they subsequently spend on paying out claims and administration/overheads. In other words like all capitalist organisations it is a simple enough equation they need to work towards - make more money than they spend.

I think because the insurers products are complicated and non-physical (the customer just receives a policy schedule rather than when they visit the Apple shop and buy an Ipad2 where they get their brand new shiny physical piece of kit) that the feel is insurance policies are somehow less valuable than other similarly costed purchases.

So I would contend that if we deem the insurers products to be of value - which surely we must because otherwise no one would ever buy them - then by inference the insurer is allowed to make a profit to remain in business and sell more of the shiny pieces of kit to more people.

However, moving beyond that simple point I do have a gripe and here it is : why do people buy a life or health insurance policy and then never review it again ?

To illustrate, I bought an Ipad when they first became available in February 2010 and now in April 2011 we have the new Ipad2 - I don’t need one (I really want one but that is a different issue!) but I’ve looked at the specs of the new Ipad and compared it to my current one and decided that the first iteration is fine for me for at least the next 12 months - so decision made I will wait for Ipad 3 in 2012 and review again.

We do this ‘update and review’ exercise with a range of products and services where we regularly compare current spend and service capability with our current supplier versus their competition : supermarkets, phone bills, broad suppliers, utilities, computers, cars, schools, mobile phones but we tend not to do it so much with financial products like your private medical insurance.

Imagine the scenario. You obtain quote from a medical insurer via the internet, a newspaper ad or perhaps invite a direct sales person to visit you at home. Whatever the route you buy a sparkling health insurance plan which enables you to claim away to your hearts content for say, £ 50 a month. Over time this premium will increase with medical inflation (running often three or four percent above the Retail Prices Index - 10% in the early noughties was not uncommon), how many claims you make and their value and of course prices also increase based on your age. The net result is that within five years you’ll be paying often double or more than your original premium.

It is also worth bearing in mind that just like my shiny new Ipad a year ago, medical insurance policies get old, their CPU doesn’t work quite as well and that flashy app that five years ago was the best out-patient benefit money could buy, frankly now has very little Vitality left at all (sorry, that is a medical insurance industry in-joke).

I know I may have rambled on a little, but I’m getting to the point now - insurers like to make money - this is not a bad thing, but ..... sometimes they make money on the back of people buying an individual policy and then never reviewing it and paying far more than they need to because of a sense of inertia that doesn’t necessarily exist with other products and services as discussed above.

When I speak to clients in their 40’s and 50’s (and often much older clients as well) who have relatively low levels of historic claims I usually find that they are paying between 35% and 70% (seriously) more than they need to. So the message I would like to put across today is that regardless of how shiny, clever or BUPA’y (sometimes people won’t switch away from BUPA because it’s BUPA - it must be the best ?) your current plan is, so long as there are no major recent health problems we can almost certainly look at transferring you across to a new insurer with no or limited extra underwriting. All you need to do is ask and we might be able to save you 70% of your premiums !!!!!

For more information contact me at :

info [at] knighthealthcare [dot] co [dot] uk

07792 075748 or 0113 3474395

www.knighthealthcare.co.uk