Jamie Green from Swiss Re offers his insight into the impact of Covid-19 on PMI
Earlier this year, REBA’s webinar on ways to use risk benefits to underpin a strategy built on data and prevention considered how the Covid-19 pandemic had affected group risk benefits, such as life insurance and income protection. The panel concluded that, although there was renewed interest in these benefits due to the pandemic, there had not been a significant change in premiums. The same however cannot be said for private medical insurance (PMI).
Jamie Green, vice president, global pensions and benefits at Swiss Re, contacted us following the webinar to highlight that he had seen a significant impact on PMI claims and on pricing for 2021/22 premiums, even in countries with integrated national health care, such as the UK.
Reinsuring employee benefits
The benefits team at Swiss Re run a direct reinsurance programme (similar to a Captive) for their employee benefits. This enables them to smooth out their costs and have more control over premiums and risks.
“Where it is possible to do so we reinsure up to 90% of the premiums for our medical and insured risk benefits. Medical, death and disability the premiums are retroceded back to us – we take the premium and take a proportion of the risk. The strategy behind the idea is that we try to price the premium as close as possible to break even and provide our local business units with sustainable pricing – so that we don’t see fluctuations from one year to the next,” explains Green.
To understand how to price the premium in each country they operate in, each local carrier or entity will price their risk locally. This will be based on their knowledge of the local market and on the performance of that policy in the wider context, in some cases that will include looking at experience history. Swiss Re’s actuaries will then agree a price that is as close as possible to break even, perhaps including new plan enhancements or discounts.
The impact of Covid-19 on global medical insurance
At the beginning of the pandemic there were different responses to the crisis from the PMI market, such as deciding to cover Covid-related claims and waiving pandemic-related exclusions for medical and life cover in certain countries. These were local decisions to support people during the pandemic. However, Green believes that there were a couple of things that happened last year that won’t be repeated.
“When we looked at claims last year there was a significant drop – people weren’t going and utilising supplementary plans – but we did see a big spike after the first lockdown in claims where every one was rushing to get all forms of treatment throughout the summer, although this tailed off in the autumn due to more lockdowns.
“This year, we’ve seen some of the pricing has been significantly inflated – premiums are significantly higher – off the back of last year’s summer. They [insurers] think there will be a rebound in claims in 2021, which is reflected in their pricing,” says Green. “However, because we can re-insure the premiums, we’ll look to land somewhere in the middle [of these price increases].”
In addition to prices being inflated and the anticipation that the number of claims will go up, Green also expects that some of the costs related to the pandemic will be passed on to private PMI firms, and there will be a rise in long-term disability/income protection claims as a result of the pandemic.
As things, in the UK at least, begin to reopen the true impact of the pandemic on our health system and wider employee benefit policies will become clearer. With the NHS already reporting a massive backlog of patients awaiting consultations and operations, coupled with those going undiagnosed due to the pandemic, the next few years in the PMI arena are likely to be busy.
The author is Dawn Lewis, content editor at REBA.
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