“In the UAE it was absolutely the norm that customers expected direct settlement of their bills – the policyholder would not have to produce his cheque book or credit card. The insurer would pay direct. In East Asia, the customer paid the bill and was reimbursed.
“That changed with the exodus from Dubai in 2008/9. Some of the reports of cars abandoned at the airport have been exaggerated, but you can see the fall-off in numbers – there’s much less traffic on the road. The expats have moved East and taken their expectations with them.”
So insurers are adapting. They are making direct-payment arrangements with hospitals and clinics. At the same time they have priced up premiums for people in Beijing and some other Far East locations.
Moves to selective premium setting are inevitable, according to Chris Beardshall, consultant to Cheshire-based brokers PMI Health Group.
He said: “As we see health care costs increasing in emerging markets where more and more expats are moving, so we are going to a more selective approach to pricing. It’s not just China, Singapore prices are also a worry.”
Bupa International has gone furthest down the road of splitting the globe so that premiums more exactly reflect risk and medical fees. In July 2009 the company made its first policy revision in 21 years. It split the world seven ways. Until then, no international insurer of individuals, and probably of groups, had divided the globe into more than three parts.
The World Health Options plan, which followed a ￡250,000 market research exercise by Bupa, also introduced pick-and-mix, allowing policyholders to choose what they wanted covered.
To see how precision pricing of premiums can pay off, take the cost of a routine appendix removal within Asia. In Beijing, it is US$12,000-15,000, in Thailand US$4,500. In Malaysia, an appendectomy costs US$6,000.
Insurers other than Bupa might well have pioneered the move to precision pricing earlier than 2009. But they lacked the data and the number-crunching facilities available to the market leader.
Bupa International then had 850,000 customers in 190 countries – figures that have subsequently increased. Mr Beardshall said: “If you look at premium increases year on year in those seven different pricing zones, you’ll see the difference in pricing dependent on cost.”
The size of an insurance company’s database largely determines the extent to which it can set premiums in line with risk. Also, the greater an insurer’s customer base, the easier it is to set up good settlement terms. Hospitals need regular customer flow, just like hotels. They reward insurers accordingly. So the trend to selective premiums will mean that smaller insurers will have to depend on their traditional strengths of personal service and niche benefits.
Mr Beardshall commented: “Bupa International is still the global name. Cigna say they are the largest in terms of number of people covered, but people still look to Bupa as market leader.”
Cigna, a US company, has traditionally concentrated on group cover, largely corporate business. But it recently entered the expat market for individually bought insurance. “Their plan is modular and very similar to the Bupa Worldwide Health Option,” commented Mr Beardshall.
To have such a big insurer as Cigna focusing on the market for individual buyers can only be good for customers.
This article was first published in The Telegraph Weekly World Edition.
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