April UK PMI exit deal puts brokers on edge

Stethoscope

  • April UK exited the UK private medical insurance market on July 16, 2018.
  • April UK stopped accepting new customers and would not be renewing current business.
  • Brokers were surprised by the exit and had no prior warning.
  • Brokers are faced with the challenge of placing customers with other insurers
  • Some clients are in the middle of complex claims for illnesses such as cancer and their cover is in jeopardy or they could face huge price increases.
  • Axa PPP has struck a deal with April to offer cover to its existing customers, but customers have been told that they can go direct, leading to broker ire.
  • Other insurers have approached brokers with April UK clients.

Exclusive: April UK’s private medical insurance exit has led to a flurry of insurer activity, but brokers have been left feeling overlooked after customers were told they could contact Axa PPP directly for replacement cover.

Axa PPP has pledged to offer continuing cover at the point of renewal for all customers of April UK plans underwritten by Axeria. The company, part of the April Group, exited UK PMI on 16 July.

April UK has said it will claw back commission where applicable, but neglected to mention this in a letter to brokers.

Meanwhile, a letter being sent to customers by April UK reveals that they are being told to contact their broker or Axa PPP to obtain a quote and advice, leading to fears that the insurer will take on customers directly.

A swift exit

Post broke the news that April UK was pulling out of the market in late July.

Brokers were taken aback by the pull-out when they received an email on July 17, the day after April UK stopped accepting new customers.

The email explained that customers would not be able to renew their existing policies.

At the time, brokers said that clients who developed illnesses requiring expensive treatment could find themselves at risk of being unable to find replacement cover. This could potentially jeapordise their access to courses of treatment or lead to vast private medical bills, particularly where clients are undergoing complicated treatments for serious illnesses such as cancer.

The agreement

According to yesterday’s announcement by April UK, customers will be able to continue their cover with Axa PPP with “no personal additional medical exclusions”.

In addition, a statement added that “no client will be left without an offer of continuing their cover at renewal”.

An email to brokers tells a similar story. It reads: “No customer will be rejected so long as they are eligible for a UK private medical insurance policy.”

However, it adds: “Naturally premiums will vary depending on the circumstances of individual customers.”

Axa PPP will not be buying April’s book outright. Instead, brokers have been told they will be able to renegotiate terms with Axa PPP mid-term. Both Axa PPP and April UK have set up broker hotlines for queries.

Broker reservations

However, some brokers have been feeling left in the cold, particularly as April UK has confirmed that it will claw back commission where applicable.

The email said: “Intermediaries can renegotiate their clients’ cover mid-term with Axa PPP healthcare although commission clawback will be applied by April UK, where applicable.”

Meanwhile, the letter sent to customers by Axa tells them they can contact the insurer to arrange cover, which brokers fear could leave them with part-empty pockets and shrinking books.

This has led to frustration for intermediaries, who are left questioning whether they will receive their cut if customers go direct.

One broker, who did not wish to be named, said: “It very much smacks of a PR exercise, rather than any real attempt to do anything for the clients. What will happen in the market is all the good risks will go, all the bad risks will be left. They will offer them cover, but they will load quite heavily depending on what the claims are, probably to the extent that it would not be economical for clients to go forward if they have made a serious claim.

“It is not really offering any real safety net, because those that need it the most are going to get penalized the most and it may not be a sustainable premium for them, whilst giving them an opportunity to get some PR.”

Despite broker qualms that Axa PPP could seek to cut out the middle man, the offer will be some welcome relief for those in the middle of a serious claim.

However, brokers have expressed reservations that claimants could face a huge rise in premiums if they choose to take on any new policy, as insurers are still likely to load premiums for those who have faced a complex medical issue or claim in the recent past.

One broker suggested that an annual policy could more than triple in the event that a client is mid-claim. The PMI broker described the move as a “step in the right direction” for customers struggling to find replacement cover.

However, they added: “It seems like they are going to offer continuous cover, but it will be at a price.”

Brokers suspect that Axa, known for being traditionally conservative and risk averse, may be more selective in the business they take on than implied.

The broker said: “If they [policyholders] are mid-claim, they are going to be faced with a steep hike.”

On pricing, a spokesperson for Axa PPP said: “The price of our healthcare cover will reflect an applicant’s medical circumstances; we’re confident that we have a range of plans that will closely match the needs and budget of April UK customers.”

Brokers have also expressed confusion over the fact that April UK and Axa PPP appear to have come to some kind of deal without any books changing hands.

Axa PPP answers

To some extent, it feels like a case of damned if they do, damned if they don’t for Axa PPP.

Axa PPP director of SME Paul Moulton oversees both direct and brokered business.

He confirmed that call handlers dedicated to April UK policyholders will be working from a script. Callers will be asked whether they use a brokers within 30 seconds and encouraged to continue using them.

However, if customers choose to go direct then they will be able to do so. Axa PPP will not be offering more competitive prices for those who do decide to go direct, Moulton said.

Where customers do go direct and wish to return to use their broker, Axa PPP will allow this, Moulton confirmed.

The insurer will be opening up product lines that are usually only available on their direct or brokered channel to both in order to find the best fit.

In addition, Axa PPP will allow an intermediary to place the business on behalf of their clients, so long as they have their mandate.

Axa PPP acquired Simplyhealth’s book of business in 2015, and oversaw the customer transition. Unfortunately, clients are not always responsive and brokers can go out of business, leading to a communication gap.

Moulton said: “We encourage clients to contact their intermediary but there will always be cases where an individual wants to speak with their prospective insurer, say, if they have a particular query about health cover. 

“For the avoidance of doubt, our helpline number for April UK’s Individual broked customers goes through to our dedicated broker team (not a direct sales team) and, as such, we will suggest they contact their broker if they are happy to do so.

“We want April UK customers – be they individual or SME – to be reassured that we are available on the end of a telephone – but more importantly, if they use an intermediary, they should take advantage of that if they wish to do so. The key thing is that customers have choice.”

Alternatives

Axa PPP is the only insurer to have arranged some kind of deal with April UK, but it is not the only insurer to have put feelers out for parts of April UK’s business and taken on clients.

Vitality offers a 10% summer switch offer, which sources said they had moved many of their non-claiming customers on to. The insurer has previously declined to comment on whether it would allow people to renew early, but broker sources suggest that it has considered this.

Other players in the market have also been looking to pick up chunks of businesses, according to sources.

According to sources, Bupa has previously sought quotes for books of SME business. It may have eyed books, but it will not be purchasing these outright, Post understands.

In addition, it is understood that April UK customers are not having medical exclusions applied or going through any further medical underwriting when they go through Bupa.

However, clients will be treated as group leavers and have to fill in a form declaring any heart problems, cancer claims or musco-skeletal issues, which will allow the insurer to load premiums and be more selective about the business it takes on.

An email dated today – a day after Axa PPP stepped in – shows that the insurer is now offering a 10% starting discount for April UK customers and will allow mid-term switching.

In addition, it reads: “Commission for April consumer customers to Bupa will be paid at full new business commission on both policies.

“If the client is currently SME with April UK and is transferring to Bupa By You this will be paid at 10% new business.”

Bupa UK director of intermediary distribution Iain MacMillan said: “We’re in regular contact with our brokers and we’ve been speaking to those with significant April UK portfolios with a view to provide them and all their consumer and SME clients with certainty that they will have continuity of cover whether they move to Bupa mid-policy or at renewal.

“We are committed to working with intermediaries to make it easier for their clients to choose private healthcare for themselves and their families.”

Clients moved

Some of these insurer efforts will come too late for many brokers and clients.

One broker said they were already at least 15% to 20% through transferring clients to another provider. Another smaller broker told Post that they had already moved all but one client on their books over.

However, worries will continue, as it remains to be seen whether claimants with complex-to-treat illnesses will be priced out of the market.

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