How popular are directional-care plans?
These plans are becoming increasingly popular. There are no official figures, but I imagine they will account for between a quarter and a third of all new policies sold in the individual market by the end of this year.
Which type of customer are they most suitable for?
Anyone who doesn’t mind the insurer guiding them to a shortlist of consultants; anyone who would actually see this as a benefit, not least to avoid shortfalls; and anyone who would ideally prefer broad choice of consultant, but sees directional care as an acceptable trade-off for a lower premium.
What are the drawbacks of directional-care plans?
It’s a constraint of choice, which is often glossed over by proponents of directional care. The ‘right’ consultant can be subjective, and there are a significant number of PMI customers who want to keep that choice in their own hands rather than defer to their insurer. Older, wealthier clients tend to be more averse to directional care, although this is a generalisation and there are plenty of exceptions to this rule.
Can we expect Bupa to join the directional-care party?
Without a doubt – it’s only a matter of time. Bupa already have their Open Referral programme operating in the corporate market, and members can also make use of it on Bupa personal and SME plans, although it’s not mandatory. So, the infrastructure is already in place – it’s just a case of adding it as a product option.
Could directional-care plans supplant traditional PMI plans and become the norm?
I think the direction of travel is such that directional-care plans will eventually predominate, if only for cost reasons. However, broad choice of consultant was a key plank of PMI marketing for many years, and there’s a cohort of PMI customers for whom choice is a very important aspect of their medical insurance. As that cohort ages, though, and younger customers come through, directional care is likely to become increasingly normative.
What are the pitfalls of selling directional-care plans?
The biggest pitfall is defaulting to a directional-care option without making it clear to the customer – we’ve spoken with a number of clients who have been offered these plans, usually as an alternative to a traditional plan, without any mention of the directional-care aspect. These policies need to be sold with a careful explanation of how the process works, otherwise they could fall short of clients’ expectations at the point of claim.
How has the increasing prevalence of directional-care plans affected your advisory process?
We used to ask the question about directional care in the cost-containment section of our fact-find, but now that question is front and centre – it’s one of the first that we ask. What’s interesting is that, once the concept is introduced and explained, the client will nearly always give a quick and decisive answer – it’s rare for someone to dither.
Could directional care erode the value of PMI?
On the contrary – the availability of good-quality products at lower price points brings more value to the product and will hopefully bring more people into the market. This will be particularly pertinent post-Covid, where, as a result of lengthy NHS waiting lists, consumers will be looking to enter the PMI market at an affordable price point.
What does this mean for the smaller providers?
A directional-care programme requires scale, which puts the smaller providers at a distinct disadvantage. Those insurers will be forced to adapt their propositions to either offer a clear alternative to directional care, or to offer their own take on it, which is likely to mean piggy-backing on larger insurers’ networks. This pressure will begin to be felt more keenly as directional care becomes more normative.
And finally, would you buy a directional-care plan yourself?
No, it’s not for me – I want as much consultant choice as possible. That doesn’t mean, though, that what’s right for me is right for my clients.
