ProtectionMay 1 2014

Bupa and the return of the prodigal son

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In particular, brokers heavily involved with the Association of Medical Insurance Intermediaries are intent on forgiving and forgetting.

Brian Walters, principal of Cheltenham-based specialist intermediary Regency Health and vice-chairman at AMII, said: “The situation could have been handled better, but it’s water under the bridge now. Most brokers will have continued to work with Bupa on SME business over the last 18 months, so there won’t be any antipathy. Brokers will recommend its individual product where it’s right for the client.”

Such positive attitudes reflect a determination not to rock the boat following AMII making a concerted effort to get Bupa back on board after its withdrawal in October 2012 left its members unable to recommend the market leader – a most unenviable position for intermediaries who pride themselves on offering whole-of-market advice.

The explanation given for withdrawal by Bupa was that the intermediary channel simply was not proving profitable for individual business. Intermediaries were instead given an option that could never be profitable for them. They could obtain a £100 flat fee for any successful introduction they made to Bupa’s contact centre for its direct product. But Bupa would handle the entire sales and administration process, and intermediaries received no renewal commission and could not even include the company in market reviews.

Some intermediaries used this facility, because they felt it was ethical to offer clients Bupa as an option, even though the remuneration made no commercial sense. But a great many did not, and they felt under no obligation to inform clients they were unable to recommend the market leader, unless specifically asked about the issue.

Richard Norris, head of consumer intermediary distribution at Bupa, says: “We stand by our decision to withdraw from the market. We had something that was totally unsustainable, but we were always going to come back in if we found a sustainable solution that would work. We now believe we have one that will work, having paid a lot of attention to intermediaries’ views for the re-launch, but time will tell.”

However, some corners of the intermediary community clearly are not convinced by the official Amii line that no one is going to hold any grudges against Bupa.

Penny O’Nions, principal at The Onion Group, a specialist intermediary based in Iver in Buckinghamshire, says: “It’s a good thing that Bupa is back in, but the fact that it has shown the power to pick and choose when it will deal with intermediaries and when it won’t has set a dangerous precedent. There is now always going to be a concern that Bupa could refuse to deal with an intermediary who has already established a relationship with the client.

“I am not sure what effect all this will have had on Bupa’s reputation. As a fee-paying broker, we could have carried on recommending its product, but others who work on commission may have taken umbrage and could hold it against the company.”

When asked about the possibility of further exits, Bupa’s Richard Norris said: “You can never say never in business, but it is not our intention to withdraw again.”

A new commission structure certainly bodes well, as does the recent appointment of industry stalwart Jack Briggs as interim head of broker relations at Bupa.

Stephen Walker, director of Brighton-based specialist intermediary Medical Insurance Services, said: “Reading between the lines, this appointment suggests a realisation within Bupa that it had made a mistake and that it is clearly realising that working through intermediaries is cost-effective. The problem with Bupa is that every now and again it appoints a new chief executive and they tend to bring in their own management experts from other industries.

“These individuals think they can restructure, but they just make the same mistakes as before. The fact that it brought in Jack Briggs, who knows the industry well and has relationships with intermediaries, suggests it is beginning to approach things from a different angle.”

Broadly positive initial feedback from intermediaries on the new Bupa By You product is also fairly encouraging. Soft-launched this January to ensure that online systems for intermediaries were working properly, and going whole-of-market a month later, it has more rating flexibility than its predecessor, primarily as a result of being able to price according to geographical location in addition to age.

Graeme Godfrey, director of Best Go Private, a specialist intermediary based in Bushey, Hertfordshire, said: “The new product is good and has everything you would want to see in a PMI contract. It’s one of the more competitive options, but location is the main thing. So for our clients, who are mainly based in Central London, Middlesex and Hertfordshire and require Central London hospitals, its prices aren’t so competitive.”

Most reservations expressed about Bupa By You refer to the fact that it has an unusually high maximum no-claims discount (NCD) of 70 per cent, which was only 30 per cent for Bupa’s previous ClientChoice product. But these are largely just the same generic criticisms that have traditionally been levelled at other insurers who offer high NCD formats, like PruHealth, Aviva and AXA PPP healthcare.

The main beef here is that PMI has been designed to help people get better when they are ill, so to encourage them not to claim through mechanisms like NCDs undermines the purpose of them having it in the first place. Additionally, policyholders can be left with huge leaps in premiums which could prove unaffordable at renewal.

“If you claim over £500 in a policy year on Bupa By You then you lose the full NCD in that year,” continued Mr Godfrey, “and £500 is a tiny level which you could exceed with a few sessions of physiotherapy and a couple of consultations. We don’t favour products with NCDs and we prefer insurers who don’t offer them, like WPA, Exeter Family Friendly, April UK and Freedom.”

Andrew Middleton, sales director at national specialist intermediary PHP, described the new Bupa product as “fresh, vibrant and flexible, giving more choice to the customer”. But he has reservations about the fact that, unlike Axa PPP healthcare, Aviva and PruHealth, it does not offer policyholders the chance to protect their NCD.

He also highlights that, unlike most other PMI providers, it does not offer “switch terms” – the ability to honour the underwriting terms of the previous insurer subject to a satisfactory medical declaration.

Bupa reports that it is looking into feedback from intermediaries on both NCD protection and switch terms, although it has not yet actually committed to introducing either. It does not, however, acknowledge that it has changed its stance towards claims during recent years, despite the fact that some intermediaries observe a hardening in its attitude.

Susie Colley, principal of Torquay based specialist intermediary West Country Health Care, said: “Bupa has been getting more aggressive at the claims stage for two or three years. For certain operations, if it feels another consultant can do it cheaper then it tries to persuade the client to switch. Along with PruHealth, it has also been getting more proactive with regard to denying claims for things like monitoring and acute exacerbation of a chronic condition.”

Edmund Tirbutt is a freelance journalist

Key points

Bupa has found its return to the individual intermediary private medical insurance market this February painless

The explanation given for withdrawal by Bupa was that the intermediary channel simply was not proving profitable for individual business

Broadly positive initial feedback from intermediaries on the new Bupa By You product is also fairly encouraging

Main features for the Bupa By You product

*A tailored health insurance that allows people to choose what they are covered for.

*Customers select one of two core options, which they can enhance with a range of optional extras.

*NCD enables customers to save up to 70% of their annual premium.

*Customers can choose to reduce costs by capping outpatient cover for consultations, therapies and tests at £500, £750 or £1,000.

*Customers have the option to choose NHS Cancer Cover Plus instead of full cancer cover to reduce costs. This means that Bupa only steps in when cancer treatment needed by patients isn’t provided by the NHS.

*Intermediaries have access to a new online portal, including online quote tools, product literature, sales tools and advice.

*Intermediaries receive a flat 10% commission at outset and renewal – whereas previously they enjoyed 25% initial commission followed by 5% renewal.