Tuesday, 30 June 2015

Why is it hard for IFA's and other professional advisers to write Private Medical Insurance business

There are a variety of factors involved in the decision that many of my introducers take when deciding to sub-contract advice on medical insurance to me.

Not least is the fact that in the 21st century most business/professionals tend to specialise in a tightly focused area of their business and taking on a whole new product area can be problematical.

However there are a range of factors that mitigate against the average IFA or Accountant being able to or even wanting to offer advice on Private Medical Insurance (PMI). I wanted to focus on probably the simplest one of these - support from PMI insurers.

Now I will preface this article by stating clearly that I am not attempting to belittle insurers here. Far from it, without their on-going support my role with clients would be next to impossible.

In the distant past many PMI insurers gave out agencies to brokers and other intermediaries like hot cakes, the advent of first GISC then FSA and now finally FCA regulation has meant that the regulatory burden when writing PMI has increased for both brokers and insurers. As a consequence the insurers have gotten far more targeted at picking which client acquisition routes they choose to support both from an FCA standpoint (hence the disappearance of many direct sales channels) and also from a profitability view point - and herein lies the problem for smaller IFA's and non-specialist brokers. It is often financial impossible for the PMI insurers ti support any broker who doesn't specialist in writing medical insurance and as a result keeping up to date on product knowledge, pricing and switching policies becomes harder and harder for non-specialists and servicing existing business effectively also becomes more of a chore and is much harder.

As a result, in short, the PMI insurers acquire the majority of their new business from the minority of PMI specialist brokers (like myself). This means that for an IFA or commercial broker to be worth support for the insurers on a day to day basis that broker needs to be virtually a de facto PMI specialist in their own right. So for example some larger IFA practices will have one or two people servicing a PMI book and generate just enough business to secure a minimum number of PMI agencies so as to act as an independent broker.

Increased consolidation of the PMI specialist market and higher targets for PMI insurers to make their business profitable have all worked against the standard IFA model being able to advise on PMI to the point where without a sizeable existing book of PMI business and the scope to increase it over time it has become impractical for the average IFA to spend time looking at PMI new business or re-brokes.

Having looked after IFA's and non-specialists now for over 21 years this is sad but the silver lining is that it does enable me to have on-going dialogue with many potential new introducers and I can often help them help their clients and of course increase revenue for their practice.

If you're interested in discussing your PMI business and how I can help just e-mail on : philknight@pch.uk.com or call : 07792 075748.  

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