Advisers are urging more insurers to enter the US market to boost competition, writes Owain Thomas.
Competition in international private medical insurance (IPMI) is potentially the biggest threat to the market for US-based intermediaries.
Advisers at the Health & Protection North America roundtable in New York City’s Rockefeller Plaza explained their concerns with a lack of insurer competition in the market including the effect on premiums and coverage options.
Download the roundtable supplement by following this link.
The situation is so significant they urged insurers from Europe or elsewhere around the world to shakeup the market and launch their products into the USA.
Vera Mira, principal – expatriate benefits COE, Mercer Marsh Benefits Multinational Advisory argued “there has to be either someone coming back into the market or there’s going to have to be another player coming in”.
Lockton Companies senior benefits consultant Tara Black wholeheartedly supported Mira’s assessment.
“Yes, I agree, competition is probably one of the biggest threats to the industry as a whole,” she said.
The panel suggested one insurer might have as much as 70% of the market share and that this was typically the most expensive insurer.
“This year, because of the higher increases I have probably marketed 30% to 40% of my clients and it’s really for pricing positioning,” Black continued.
“If you’re talking to clients, their end goal is to say they don’t want to move, and it is a risk to move them because there’s going to have to be another player coming in”.
Lockton Companies senior benefits consultant Tara Black wholeheartedly supported Mira’s assessment.
“Yes, I agree, competition is probably one of the biggest threats to the industry as a whole,” she said.
The panel suggested one insurer might have as much as 70% of the market share and that this was typically the most expensive insurer.
“This year, because of the higher increases I have probably marketed 30% to 40% of my clients and it’s really for pricing positioning,” Black continued.
“If you’re talking to clients, their end goal is to say they don’t want to move, and it is a risk to move them because implementation isn’t always smooth.
“It can feel very different going from one carrier to another no matter what they promise, I’ve seen it firsthand being with multiple carriers on the other side of this, so there’s definitely some risk there.”
Black noted that it was particularly frustrating that when responding to an initial renewal quote the insurer does not consider moving but then changes when other quotes are sourced.
“We’ll go out to market and the original insurer will say here’s another 10% off,” she continued.
“I’m thinking, well, you could have saved us this time and headache if you had just given that to us. But we struggle with some insurers on that end because we would like not to go out to market.
“Obviously, that’s more time and effort on our end and just gives us the renewal that we’re asking for,” she added.
Insurer upheaval
Much of this market disruption stems from recent upheaval with MetLife withdrawing from IPMI altogether and Aetna International also taking a significant step back.
But the panel was adamant there was opportunity and desire for more entrants into the sector.
While some already active US-based insurers are looking to grow their international businesses, there was hope that some based in Europe would consider entering.
“Can Allianz come into the US market and be that player – I don’t know if it can because of the relationship with Aetna international, but something like that,” said Mira.
“It has to be somebody that comes from the European side that can come into the US market, and maybe that will shake up the industry because as of right now that’s what we need, we need more competition,” she added.
One other sticking point was the understanding that many employers were keen to use the same domestic health insurance provider for their international coverage. Therefore having domestically compliant plans was also seen as an important consideration.
However, a significant part of this motivation for new entrants was premium driven with the panel noting that rate increases have been “astronomically higher” than historically seen with base renewals starting from 10% to 12% instead of 7% or 8% ten years ago.
Reconsider rates and underwriting
While going to market can typically tease better rates from insurers, there are other ways to understand the pricing dynamics and reasoning.
Joe Cronin, president of International Citizens Insurance, explained the firm had spent time working with one insurer partner, identifying countries where the majority of its clients will go and negotiated with them to re-examine rates.
“A lot of times we’ll talk with insurers and ask why it is so expensive to cover somebody in this country and the insurer would say it had a lot of fraud there,” he said.
“When we say it’s been overpriced for ten or 12 years, we ask if they have looked at it in the last couple of years and push them to reconsider that pricing and realign it.
“Any fraud that happened ten or, 15 years ago, they will have put things in place today to control those costs or manage that fraud, so now they can realign the pricing.
“One of the ways we’ve done that is we show the discrepancy in pricing for their plan compared to three or four others for the same person and theirs might be 50% more expensive.
“So we’re pushing them to relook at how they underwrite and price their plans to better serve our clients who are moving to some of the growth and high-volume areas; some European countries and Mexico in particular,” he added.
Difficult market conditions
The insurers present acknowledged there might be more the sector could do overall but highlighted some of the ways they were aiming to address such concerns.
Communication and transparency were high on this list, along with preparing people for rate rises in advance.
“Having come from the brokerage side years ago, I wonder if we need to start telling people more frequently to expect a 15% increase annually,” said Insured Nomads CEO Andrew Jernigan.
“Then they’re surprised if it doesn’t go up at renewal, but at least they can communicate to their leadership to budget for at least a 15% increase each year.
“We haven’t increased our group plans in the six years we’ve been around, but I’m sure there are some groups that due to experience that will occur at some point.
“The cost of sending expats abroad and the difficulties are decreasing the numbers that we’ve seen in years past, along with the increase in the utilisation of employers or record (EORs) and employers deciding to just hire someone from the local country.”
Jernigan particularly highlighted this devolution into hiring contractors and local nationals as a key trend which insurers needed to be cognisant of.
There was also recognition that life for many advisers and employers was difficult at present and insurers had to be mindful of that.
Trawick International business development director Anders Blak acknowledged many sectors were facing economic challenges.
“I was in Washington DC with a non-governmental organisation (NGO) focused broker and they were explaining the challenges for an upcoming renewal,” he said.
“They need to provide a census for the renewal, but he did not even know if the employer could provide a census now.
“It could change 30%, 50%, 60% – so it’s a challenging period for at least certain industries.”
Value of great teams
But on a wider scale, Blak agreed there was demand and the potential for greater transparency and explanation of decisions.
“Sometimes we could be more transparent in order to show how the numbers can be supported,” he continued.
“With SMEs, which are all pooled, just this morning we had a renewal and they asked if we could please reduce the increase, because they think they have a very healthy plan.
“But if you communicate to them that we could lower the rise, but for stability in their rates then we cannot because then you’re not experience rated.
“So a lot of the communication and transparency is important,” he added.
However, the panel was keen to highlight there are some very positive elements offered by the current crop of insurers.
There was praise for where insurers get things right and the panel identified some of the key elements for driving great service and future client demands.
In particular, the Middle East was cited as a key region of growth for corporate customers and having great teams in the region could result in significant business retention and winning.
Dubai and increasingly Saudi Arabia are hotspots in the region, attendees noted.
However, particularly in Saudi Arabia, many organisations are only employing locals so for insurers to be successful in these markets they must have support on the ground and be able to handle the local niches.
Download the roundtable supplement by following this link.
