As the world fights recession, expat healthcare has shown high levels of immunity, due to its total market spread. But the sector is changing as compulsory local health cover in specific countries rises and brokers get creative with tailor-made policies
Earlier this year, US health insurer Cigna’s chief executive, David Cordani, announced plans to “aggressively” expand the group’s overseas business, particularly in China and South-East Asia. A combination of uncertainty over the outcome of US president Barack Obama’s healthcare reforms and a lull in domestic membership – as American employers shed staff and with them medical cover – is partly behind the overseas push.
But there is also a significant pull factor in the rich pickings that can be made as the global expatriate workforce continues to expand at breakneck speed.
An estimated 190 million people live outside of their home country. That’s almost twice as many as 30 years ago, and while not all of those people require expatriate healthcare insurance, a majority of them do, creating a market that is worth tens of billions of pounds.
The precise cash value of the global healthcare market is hard to quantify. Aside from companies and individual expatriates requiring healthcare cover while working abroad, the market also includes cover for backpackers trudging their way around the world for a year or more, as well as high net worth individuals who want cross-border healthcare cover that enables them to get treatment wherever they want.
In good health
The type of insurers covering the market is equally diverse, embracing local and multinational specialists and other major carriers such as Bupa International, AXA PPP, Allianz, Cigna and ING.
And while fears of double-dip recessions continue to haunt the financial sector, healthcare insurers are sounding remarkably bullish about the future. Indeed, it seems they hardly noticed the recession at all.
“There was a downturn in enquiries last year as organisations brought some expatriates back,” market leader Bupa International’s sales director Tim Slee says. “But even then, there were no wholesale lapses. Firms had less people overseas during the summer and autumn of 2009, but now we’ve started to see more activity, more expatriates being sent overseas, and more enquiries.”
Slee adds that operating in a range of different markets across the world incubates international carriers from the worst effects of what has arguably been a western recession.
“International healthcare insurers by definition have an element of protection in that they are not in one single market. If you’re a local insurer in a country where the recession has hit hard, you’re going to hurt. But if you’re in many markets, as Bupa International is, you’re going to benefit from being able to spread your risk around the globe. One market may be suffering but another may be doing okay.”
Premium rate increases in the health insurance sector have averaged annual jumps of 10%-15% in recent years and, although margins have taken a bit of a battering due to a combination of the recession and increasing competition, that growth is continuing.
“Overall, different companies put their prices up by different amounts, but you wouldn’t see anything less than a 10% increase in premiums year on year,” Interglobal’s head of sales and marketing, Paul Weigall, says.
“Medical inflation is the key factor in premium calculation. You can normally count on increases of 10%-20% annually in medical inflation around the world, as drugs and new, more advanced medical equipment and procedures get more expensive.”
Jelf international business consultant for healthcare Sarah Dennis says: “Worldwide medical inflation is 12%-15% and, for the last few years, renewals have averaged around that too. But we’re now seeing some astronomical jumps in premiums with some insurers.”
Dennis says there have been “unusual and hefty increases” in policies for South-East Asia, despite the fact that this region has been less exposed to the impact of the global recession than many others, most notably the USA and Europe. “It’s quite strange,” she says.
“Medical inflation in the international market is interesting,” Slee says. “Some of it depends on which market you’re in. If you’re involved in Kazakhstan because you’re working with oil companies, for example, and let’s say a hospital or clinic there just got its first MRI scanner. The medical inflation you are going to see there is huge because the cost to treat the condition that the hospital would normally examine with just an x-ray suddenly rises ten-fold.
“That type of increase doesn’t happen suddenly in the UK or USA because they’ve got modern technology coming onstream on a regular basis.”
The right fit
With all this talk of double-digit spikes in premiums and increased enquiries, you would be forgiven for thinking that the little matter of the global recession that has cut a swathe through the world’s economies has bypassed the expatriate health market.
Not quite. The recession has affected the sector in some ways, most notably with shrinking margins. “Margins do get squeezed during a recession because you need to be more competitive,” Weigall says. “Like everyone else, we try to avoid cutting our rates but it’s inevitable when you’re looking to hold onto business.”
At the same time, brokers are increasingly advising clients on ways to reduce premiums through taking a more bespoke approach to their policy, perhaps by scrapping expensive cover for emergency evacuation or repatriation if the country you or your employees are working in has good, modern medical services.
“We may look at whether they really require some of the luxurious benefits, such as the dental options or maternity options, or we might consider a larger excess to reduce premiums,” Dennis says.
Tailoring a policy in this manner is now easier with the advent of schemes such as Bupa International's recently launched World Health Options plan, which allows policyholders to pick and mix the modules they want from a policy.
But recessions also result in increased claims on healthcare policies. “People ensure they use their healthcare provision in case it is withdrawn, or the company makes them redundant,” Slee says.
“Against that backdrop, people make sure they are up to date with healthcare issues. They don’t put it off.”
Despite recent criticism that brokers are failing to properly advise expatriates on international health insurance, the face-to-face service offered by them is crucial to the sector, even in the era of online purchasing.
“Expats do like a personal relationship,” says vice-president of insurance sales, Dan Tuman, at US-based Clements, which last year opened an office in London. “They still like doing business the old-fashioned way, by working with another expat who is also an insurance broker. So getting a relationship with those brokers can generate a lot of opportunities.
“You also need that face-to-face contact on the international organisation side of the business too. You need to attend trade shows and make time to visit people overseas.”
Tuman’s view is reiterated by Weigall. “In international markets, brokers are important because they have good local knowledge. Most corporate health insurance business is placed through brokers,” he says.
“We’re always looking to seek out new brokers through online and magazine advertising and networking. Most brokers know who the main players are and will make contact, but we’ll search them out too. You want brokers that can give you business, however; you don’t just want to be used for quotes.”
Bupa also use a range of brokers, from global titans such as Aon, Marsh and Mercer, to small local specialists. “With increased regulation, very often you can only sell through distribution that’s regulated in the marketplace,” Slee says.
The issue of local regulation is causing a good deal of agitation within the industry, as it is becoming increasingly difficult for expatriate workers to get by with an international policy alone.
Abu Dhabi, Bahrain, Saudi Arabia, along with Holland and Germany, have all introduced compulsory local medical cover for expats, policies that are almost always invalid outside national borders. Indeed, buoyed by the success of the move, Saudi Arabia is understood to be planning to make its health insurance cover compulsory for the nine million Haj and Umrah pilgrims who visit the country each year.
Although Dubai has abandoned plans to follow suit – in a bid to avoid further costs on business during the recession – compulsory local health cover is increasingly becoming the norm and in future expats will have to purchase a local plan to comply with entry and residency formalities along with their international cover. That said, as policies become more bespoke, part of the additional cost could conceivably be offset by taking a higher excess on the international policy.
The future hot spots for expatriate healthcare insurance are likely to be pretty much the same as the current ones. “There’s been a lot of talk about Dubai and obviously there has been a big exodus of expatriate construction workers in the last couple of years,” Weigall says. “But there’s still a lot of professionals in Dubai and the rest of the UAE, and in the wider Middle East.
“There is still a lot of oil and gas, and opportunity for expat workers in places like Qatar, Kuwait, Bahrain and Saudi Arabia.”
Slee adds that Russia also has huge potential, but the principal hot spot for expatriate healthcare insurance is China and Asia generally. “Asia has always been a hot spot because of Hong Kong, but now there are also the emerging markets of Singapore and Vietnam,” Dennis says. “It’s a massive growing market.”
Based on current trends, you could say that about the entire expat healthcare sector. IT