Third party administrators hold the key to PMI's future, says Clive Kent
Over the past 25 years, third party administrators (TPAs) have become accepted players in the UK insurance industry across a range of product sectors. But, despite their committed role within the healthcare market, the TPAs' share has remained small - less than 5% of the entire PMI market, according to Laing & Buisson.
However, we are now entering a new era in the provision of healthcare insurance, and the role of the
TPA is going to become increasingly important.
Despite many attempts to increase its share over the last five years, the traditional PMI offering has remained stagnant, with penetration yet to exceed 12.5% of the UK population. It has simply become too expensive and too inflexible in a marketplace crying out for innovation. New entrants are demanding greater variety of benefit options and prices, and the traditional product simply cannot meet these demands - hence its inability to grow.
TPAs have historically operated in the self-funding corporate market, where companies have opted out of insurance and turned to the TPA for a tailored PMI scheme for their staff. Interestingly, once the decision to move to a TPA has been made, companies tend to stick with it.
There are several key drivers behind their decision. First, the TPA has traditionally delivered a more complex variety of healthcare propositions. Second, TPAs have a consistent track record of delivering quality customer service. Third, it is vital to support the administration of any plan with experienced staff, well versed in the healthcare market. Healthcare TPAs pride themselves on the expertise and knowledge of their people. And last, but not least, TPAs have robust IT platforms that are able to deliver a diversity of complex products.
As the "flex benefit" market takes off, a greater diversity of products will become increasingly important.
Insurers will have to deliver a wider range of these flexible products as quickly as possible if they are to retain their market share.
Despite the promised injection of cash into the NHS, there is an enormous gap for the healthcare insurance market to fill. In my opinion, TPAs hold the key to help new entrants and existing insurers unlock future growth.
Clive Kent is commercial director at Rubicon Health
