The problem with private medical insurance and what to do about it
Financial products where brokers and others take big commissions never represent good value for consumers. Unit trusts in most countries are poor value given the slice taken by brokers and then the slice taken by fund managers who, on average, fail to beat the index. Private medical insurance in the UK is worse.
It is shocking that large brokers in the UK take a 55-60% slug of commission on first year sales on individual policies. Even more shocking is the way this encourages these brokers to churn the policy each year. A churn rate of 40% means that roughly a third of all payments does to intermediaries. Add in the fact that UK hospitals and specialists tend to change 20-30% more than private hospitals in mainland Europe and you can see why the number of individuals with cover has dropped 35-40% over the last 15 years or so. UK PMI is not exactly value for money, is it?
The answer is to move to a web model where consumers select the product they want directly. That is happening – take a look at Bupa’s app. But it is a slow process and the actual prices charges to consumers will have to drop before the product represents good value. That leaves a window open for innovators like Passport2Health who offer care in continental hospitals at 30-50% of the price.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
