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The Need for Health Insurers to Mind The Gaps - Cover magazine Health Insurance Live event

30 June 2021 

The Need for Health Insurers to “Mind the Gaps” 


I’ll start with an admission. I am not a health insurer.  In fact, I was surprised, and flattered, to receive an invitation from Cover to provide a keynote address to you this morning. So what can I talk to you about and why should you listen to me for the next 20 minutes or so?  

Whilst health insurance is an important part of my portfolio of responsibilities, as the Director of General Insurance Policy at the ABI, there is a breadth to the areas I cover – from motor and home through travel to more specialist commercial insurance products like trade credit or cyber insurance. That provides me with the ability to come to you this morning to offer some thoughts at a macro level, drawing on some lessons I’ve learned from my work across the general insurance market. So, I can offer some perspectives on the challenges and opportunities that lie ahead for PMI which I hope provide a useful context to the remainder of your conference today. 

I’ve called my remarks this morning “The Need for Health Insurers to Mind The Gaps” as I would suggest that there are three key gaps in terms of where the industry is, relative to where it needs to be. But before I get to that, I wanted to provide you some thoughts from a more macro perspective, looking the role of the health insurance sector throughout the course of the pandemic and the wider regulatory context.  

PMI’s response to Covid-19 

As the first national lockdown began in the UK last March, insurers began receiving claims from businesses hoping that their business interruption insurance policies would cover them for pandemic-related losses. Insurers and the ABI worked with the FCA on a novel, fast track process to obtain a definitive view from the courts on policy coverage. For an industry that had a problem with consumer trust before the pandemic, this episode has made things worse.  

Having said that, I strongly believe that the industry’s response to the pandemic should not be defined wholly by the issues associated with business interruption: 

  • over 40 million insurance customers have benefitted from the reassurance and clarity provided through our customer commitments around home working or using their car for work and NHS volunteering; 
  • Our Covid-19 Support Fund has collected over £100 million to support charities and community groups; and  
  • A new and innovative £10 billion reinsurance facility was implemented to enable trade credit insurance to continue to support the economy.  

As the pandemic drastically changed the health landscape and the needs of the population as a whole, PMI played its part in helping the country deal with the crisis. Health insurers quickly adapted their service offering to meet those needs by increasing digital provision - offering more remote GP and physiotherapy appointments and providing additional mental health support services. On top of that, we worked with independent healthcare providers to enable the NHS to take over private hospital capacity which enabled non-Covid+ patients to get the sometimes life-saving treatment they needed. Don’t under-estimate the importance of this arrangement in helping the NHS Covid effort. Imagine for a moment the reputational counter-factual if insurers and the ABI had not worked so hard to put it in place. And, of course, leading PMI providers proactively offered premium rebates to their customers. As private hospital capacity returns, PMI providers will now need to address the surgery backlog. In any normal time that represents a significant challenge that so many of you will know only too well.  

The FCA’s General Insurance Pricing Study  

But it also represents a challenge in the context the regulator’s increased focus on the need for products to offer value. At the end of May, the FCA confirmed its final rules as part of their long-running review General Insurance Pricing Study. In the wider general insurance market, these reforms represent a once-in-a-generation opportunity to fundamentally change  the way insurance products are priced, bought and sold and to deliver a personal lines market where consumer loyalty is not punished, shopping around on price alone is not unduly rewarded and the quality and value of a product and whether it meets a customer’s needs becomes more of a focus than the headline price.   

Although the headlines have mostly focussed on the implications of these changes for home and motor insurance customers, the FCA’s reforms will also have significant implications for PMI providers. The ABI successfully argued to the FCA that PMI should be excluded from the auto-renewal rules given the danger to customers of allowing their policies to lapse when they are seriously ill or undergoing care. PMI is, however, included within the scope of the FCA’s new product governance rules. This will mean that firms need to review the value their products provide and report to the FCA on how customers are receiving fair value for their money.  

Relative to other general insurance products like motor, property or travel, health insurance is poorly understood. And for a product with sometimes very expensive premiums, partly because of the taxes imposed, it will be important for PMI providers to work through these product governance rules carefully and methodically to ensure that the value their products provide is clear.  

The wider public policy context 

The experience of the pandemic has demonstrated the ability of the PMI sector to play an absolutely pivotal role in solving major societal problems. So what are we as an industry going to do with that? Seeking to return to some form of business as usual is understandably an attractive proposition. But my challenge to the sector is that our aspirations should be higher than a return to BAU. The opportunity is now if we are going to convince the Government of the vital role that the private insurance market can play in helping to improve the nation’s health and wellbeing.  

And we have so much to offer from a public policy perspective. Post the economic crisis of 2007/08 and in advance of the pandemic, the UK was one of the worst performers amongst advanced economies in terms of productivity, and improving productivity is a key factor in driving sustainable economic growth. You know, I know and the Government knows that healthy workforces are productive workforces which is why it is so important to get people back to work as soon as possible following any health problems an employee faces. In 2019, nearly 140 million workdays were lost to sickness absence through illness and injury and, with presenteeism factored in, this comes at an estimated cost to society of £92 billion. The cost of mental ill health in the workplace is estimated to be in the range of £30 – £45 billion per year.  

When staff are not at work due to ill health, companies lose out because of the impact on their bottom line; the employee loses out because there is a risk they fall out of work altogether without appropriate treatment and support, with a consequent impact on the individual’s financial resilience; and the economy overall loses out because of the significant loss in overall productivity.  

This presents a huge societal problem and public policy challenge. But it also represents an enormous opportunity for health insurers to play an important role in providing a solution. Health insurance already promotes a healthier population and boosts productivity, but there is space for the market to grow. Despite the large proportion of health insurance provided through the workplace, only around 5% of businesses with employees provide PMI. The Social Market Foundation, as part of a report commissioned by the ABI, found that the most common reasons businesses chose to purchase PMI and cash plans was as a recruitment and retention tool, a moral duty to do so and company reputation. What that tells me is that there is an under-tapped awareness in the corporate world of the powerful role that PMI can play in protecting and improving the productivity of a business.  

In addition to getting better at explaining the benefits of PMI in the corporate world, we need to get better as an industry at explaining the benefits of health insurance to the Government. There are significant barriers to having this conversation. Firstly, despite the billions of pounds of claims that are settled each year, in common with other general insurance products, there continues to be a deeply-held perception that insurers always try to wriggle out of paying claims and PMI is seen as no different. Secondly, and linked to the first barrier, is a concern that the industry’s focus on the prevention agenda is somehow linked to not wanting to pay claims rather than a genuine desire to try to keep people well. Thirdly, PMI is seen as a product for the wealthy and there are political risks for Governments in being seen to provide benefits to one group of society, especially if that group is at the higher end of the income spectrum. Fourthly, a perception that any increased involvement of the PMI sector in improving the nation’s health must be the privatisation of the NHS through the back door.  

Overcoming these barriers is absolutely critical. But to do so, there are three key gaps which, as I alluded to at the beginning of my remarks, need to be addressed if the PMI industry is to get to where it wants to be in terms of its engagement with Government.  

The evidence gap 

Firstly, we must address the evidence gap. To change the value perception of health insurance we need to get better at improving the evidence base at our disposal to demonstrate the positive health impacts that PMI provides to the overall health of society. Frankly, the evidence base today is not good enough, which is why the ABI Health Committee has rightly made improving this the number one priority in the Committee Business Plan this year.  

By building a high-quality evidence base, we can better justify our public policy asks and feed those asks into Government decision making. We all know, for example, that there are significant tax disincentives on employers providing PMI as a benefit to their employees, including both IPT and the treatment of PMI as a benefit in kind. Asking for favourable tax treatment was a big ask before the pandemic. With the Government having spent – and continuing to spend - hundreds of billions of pounds supporting the economy through the headwinds of Covid-19, this is an even bigger ask today. So the evidence required to justify any of our policy asks of Government has to be robust and comprehensive, demonstrate how health outcomes for citizens will be improved and that it will save the Exchequer money in the medium to long term. No doubt the intermediaries in the audience today would also welcome this additional data as it could help you tell a different story to your clients about how PMI supports healthy and productive workplaces. In addition, insurers should continue to do more to continue to evolve their product offering so that PMI is as affordable as possible, and they should provide evidence of this.  

Addressing the evidence gap will require a significant effort at the individual firm level and at the collective industry level. I know that there are a number of competing priorities on data teams within firms, especially in terms of the changing regulatory framework that I was discussing earlier. But juggling competing priorities is what we do in our jobs every day. My ask of the industry is to ensure that you dedicate the resources and effort to getting us the data we need. Help us to help you.  

The expectation gap 

The second gap that we need to address is the expectation gap, that is the gap between what a customer thinks an insurance product provides and what the insurer thinks they are providing cover for. The expectation gap lies at the heart of the debate last year on whether insurers were liable for business interruption claims from businesses forced to close as a result of the pandemic.  

You might think that the complexities of a commercial business interruption insurance policy bear little relationship to a health insurance product, but I would encourage you to think again. Around two-thirds of PMI coverage is provided by employers through the workplace. While this has many advantages, the beneficiaries of that cover are much less engaged in the purchasing journey. The question for firms to reflect on in that context is how to ensure that the end user of the product – not necessarily the purchaser – has sufficient information available to them and that they understand the insurance product that is covering them.  

These challenges are the reason that I wanted to be involved in the work of the Chartered Insurance Institute’s Transparency Forum which has made a number of recommendations to the industry about how to better meet customer expectations. And I use the word industry rather than insurers deliberately. Brokers and employee benefit consultants need to work together with insurers – as an industry – so that customer understanding and engagement are a priority. No-one wants to see an insurance apathy trap where customers become even less engaged in understanding their insurance. Less engaged customers are less informed customers which presents a real risk to the industry. 

The transparency gap  

The third gap that I think PMI providers need to work on in terms of seeking to improve customer understanding and trust is what I’ve termed the transparency gap. The Paterson Inquiry and the Cumberlege Review have both shone a light on the lack of transparency around the potential for financial conflicts of interest to operate in the independent health sector. The Government has been slow to respond to this but, frankly, so has the industry.  

The Private Healthcare Information Network (PHIN) has been working since 2012 to develop a way of collating and publishing information from across the industry with a view to aligning information held in the private sector with that held in national data sets. In a sector where many clinicians work in both the public and private sectors, it is a glaring omission that there is no coordinated and centralised repository of data about a consultant’s whole clinical practice. Such a repository is needed so as to minimise the risk of malpractice, reduce the potential for outliers to go unnoticed and, ultimately, to improve patient safety outcomes. And it is taking too long to materialise.  

One of the effects of the FCA’s GI Pricing interventions might be to reinvigorate progress on effective data sharing between the public and private health sectors given the importance to insurers of being able to demonstrate that they are delivering a high quality of patient care, in addition to demonstrating a product’s value for money.  


The last year has been a time like no other and the coming months will continue to be challenging for the PMI sector both as the pandemic continues to have an effect on waiting times but also as the governance remedies in the FCA’s GI Pricing review need to be implemented by the industry. But out of a crisis comes opportunity. This is a unique moment in time to improve our industry’s engagement with Government. That requires some self-reflection as an industry. We need to ask ourselves whether there is more that we can do to explain what PMI is – and what it isn’t; but also to address some of the gaps the industry has in its arsenal if it is to engage in a meaningful dialogue with the Government.  

So I hope you have found my comments this morning both interesting and, hopefully, a little challenging and that they have provided a useful context to some of the discussions to take place over the remainder of the conference today.  

Thank you.  

Last updated 30/06/2021