In this iPMI Magazine industry exclusive, Christopher Knight, CEO, iPMI Magazine, sits down with Gary Dawson, Director of Business Development at Pacific Cross Insurance. They discuss in detail the development of the IPMI market in Asia Pacific including IPMI adoption rates, mandatory insurance schemes, IPMI premium costs, insurance broker and intermediary network development and Pacific Cross Insurance international private medical insurance plans.
Please introduce yourself and background in the international private medical insurance market:
Born in Canada, working and living in the insurance business since 1977; the past 17 of those years in Vietnam. Life and health insurance have been my life, with only two employers, and my insurance education consisting of CFP, CLU, CH.F.C., LLIF. I have worked in distribution for 20 plus years and in administration for 20, so well rounded in life and health and as I look in the mirror, well rounded in my eating habits.
You have an extensive background in the international medical insurance market. How has the market developed in that time?
Globally the market has changed dramatically since my joining in 1977. We have seen the whole industry turn upside down due to technological gains. At present day we are now going through another step in that evolution due to technology. In the early days this was assisted by the introduction of the internet – where people self-diagnose – going online for anything they wish to know. There were leaps in the understanding of health management, lifestyle changes and in turn the expectations of the insured person. A more mobile population travelling worldwide for both vacation and work, people wanted the newest and latest in preventive testing and diagnostic reports. Currently we have the introduction of new medicines with specialty drugs being prescribed at a price the insurance industry did not anticipate, CRISPR technology, genetic testing, deep learning, AI. In short, everything has changed. The one thing that remains the same is the client wanting full protection and coverage without too many questions or qualifications.
Specific to the Asia Pacific Region, there has been some remarkable growth in the past 10 to 15 years. Countries such as Vietnam and Indonesia have seen huge demand for healthcare fuelling a doubling or tripling of health insurance and personal accident premiums. In the past, private international medical insurance was something which only expatriates and affluent citizens of SEA nations considered. We have for the past few years however, seen a rapid increase in consumers at the individual mid-market level and in group schemes, not only in the countries mentioned above, but across the region.
Pacific Cross Group of companies operates in Hong Kong, the Philippines, Indonesia, Thailand and Vietnam. How popular is the adoption of international private medical insurance in these countries?
That’s correct, the Pacific Cross Group is made up of Insurance companies and TPAs throughout Asia, including Hong Kong, the Philippines, Indonesia, Thailand and Vietnam. In these countries the adoption has been fantastic. In the early years it was all about the expatriate community requiring coverage for a location and an environment that was new; they wanted peace of mind. Today it is about the local communities understanding the benefits of IPMI and deciding they want treatment in other locations, or at a hospital level other than what the government provides the general population. People want choices, service, and are willing to pay for it, as they are growing economically. IPMI fills this need.
The examples of Vietnam and Indonesia were mentioned above, and it is certainly true that IPMI has become increasingly more popular in those countries. This is mainly due to dissatisfaction with state insurance schemes coupled with a rising standard of living and more money in the pockets of average citizens, especially in urban areas. The same can be said of Thailand, although on a slightly different scale. Thailand has recently announced requirements for foreigners to have health insurance, a big boon to the providers of IPMI plans. More established IMPI markets like Hong Kong and the Philippines, although further along in market development, continue to show growth. This is more notable in the Philippines, where IPMI allows consumers to access a higher level of healthcare which is becoming more readily available but is out of the price range of the uninsured.
Can you walk us through the range of international private medical insurance plans that Pacific Cross offer?
We offer a range of coverage appealing to all budgets, whether the employer is paying, or the family is paying, our plans are built for a person to adapt coverage that fits their needs and budget, for treatment at their preferred location. As time progresses the client is given the flexibility to make choices assisting them to manage the premiums and coverage as it reflects their changing needs. All these choices are built around our desire to provide solutions and service to the client for their lifetime. Once a person has a policy and some time passes, the waiting periods are finished. The client can enjoy sound coverage for their lifetime; policy renewal is assured, and the policy renews until age 90. As situations change our clients can then make coverage or premium alterations based on their needs, regardless of where they live or are moving. We have many clients who have been with us for 20 to 30 years or more and as they age, they may choose to alter their coverage to suit their budgets and needs. Knowing they have a policy for life no matter their claim history is a big relief to many clients.
The Pacific Cross Group of companies offers plans tailored for the local market in each country where our offices are located. As it would take too much time and space to list all those plans here, I’ll outline the US dollar medical plans offered regionally by Pacific Cross Insurance Company. These plans are administered by our TPA office in Hong Kong.
The range of plans includes four separate options which offer benefits ranging from Inpatient only up to a fully comprehensive package.
Starting at the low end, we offer the Major Medical International Plan, which has an annual deductible (the client has choices in terms of the amount). This is an inpatient only plan with a maximum overall benefit of 250,000 USD / 1,000,000 USD. The plan caters to consumers who want to cover inpatient only scenarios in which they are hospitalized or require emergency assistance. For reference, the Major Medical plan with worldwide coverage would cost $1,360 USD annually for a healthy 40-year old applicant.
Moving up the ladder we come to our Premier International Plan. With an overall maximum benefit of 250,000 USD /500,000 USD, this plan offers worldwide coverage or a discount for a geographical restriction, no annual deductible and Inpatient and Outpatient options. This plan is for those looking for more complete coverage, but do not require a large overall maximum benefit. It is popular with long-term expatriate people living or retiring in Asia. A healthy 40-year old can purchase a Premier Plan with worldwide coverage for $2,406 USD.
Nearer the top we have our Standard International Plan. With a schedule of benefits, discounts and optional add-ons such as travel, dental and PA, this plan bears many similarities to the Premier Plan, but with higher benefit amounts. The overall maximum is 1,000,000 USD / 2,000,000 USD. This plan is popular among the expatriate community based in SEA. A healthy 40-year old on worldwide coverage would pay an annual premium of $3,416 for the Standard Plan.
Our biggest option is the Comprehensive International Plan. A full package plan which has all additional benefits like: dental, vision, travel and PA built in, this is the largest and most robust plan in our lineup. The overall maximum benefit is 2,000,000 USD / 3,000,000 USD. Premium for worldwide cover for a healthy 40-year old on the Comprehensive plan comes in at $5,310.
You’ll notice that all four of these plans are intended to fit next to each other seamlessly and provide our consumers with a range of options from very affordable to very robust. We have tweaked our product line in recent years in order to achieve this seamless range.
One of the most common topics we hear about is the cost of International Private Medical Insurance premiums. How will the cost of IPMI change in the coming years and what are the key drivers?
This is a big question, having a complex answer. On a macro level, advances in medicine and treatment protocols will be the biggest impact to the premium’s insurers charge. People want treatment at recognized locations, they want the newest diagnostic tools, the best medicine, in addition they are treated for longer periods of time as they are living longer. But people are premium conscious and want lower premiums while maintaining the high service levels. Governments cannot afford to deliver to this level of expectation, and so it falls to the IPMI industry to deliver. It is my experience clients do not wish to know the details; they just want the bills paid – an interesting dilemma. This can be achieved for long-term clients, but newer clients who do not stay with their insurer are difficult to balance.
New diagnostic procedures are also a big contributor to increased premiums. Now doctors will routinely apply a long list of diagnostic tests to a client just to rule out other illness, and so the medical bill increases based on these tests. With people living longer, diseases being managed for longer periods of time, and the advances in medicine, the IPMI product must keep pace with these advances by passing along price increases to the client.
Specifically to Asia, it is important to distinguish between two groups of consumers – citizens of SEA nations which form the majority of our markets, and the traditional expatriate, who is also a part of the Pacific Cross Group‘s client base. Health insurance premiums for the first group tend to be lower than the second on average, with an annual cost in the neighbourhood of $500USD in countries like Thailand, Vietnam, Indonesia and the Philippines. As salaries and spending money in these countries continue to climb, so will the demand for healthcare and health insurance. Premiums will continue to rise in the coming years due to these factors.
For the typical expatriate, we see average premium prices, and of course benefit levels, higher than those paid by SEA citizens. While salary levels are not a driver of health insurance demand, the overall compensation packages and cost savviness of the employers, as well as cost consciousness from the expats themselves, means are seeing some plateauing or stabilization of premium costs. The days of the “big expat package“ are behind us, and the demand for 3 or 4 million USD health insurance plans is shrinking. As mentioned above, at PCIC we see lots of interest in our mid level and low level plans such as Premier and Major Medical. In today’s expat climate and as clients age, there is more and more need to manage premiums.
One factor which is affecting both groups however is medical cost inflation. Medical costs are rising across the region at a rapid rate. In 2018 we saw medical cost inflation rates ranging from 9% in Thailand to over 23% in Vietnam. This will ultimately affect the rates which insurers charge for their health plans, but along with the above mentioned factors I would not expect massive premium increases in the next 3 – 5 years.
In which countries across the Asia Pacific is international private medical insurance mandatory for expatriates, remote specialist workers and travellers?
Thailand has recently introduced mandatory coverage for 10-year visa applicants and in October a long term stay visa (12-months), and as far as I know this is the only country in the region that does that. In general, travelers have insurance requirements if they need a visa, but no visa needed then there is no coverage verification required. However, it should not be a requirement by the government that makes a person have coverage. Coverage should be a social requirement as too many times an accident or an illness overseas leads to family members selling their assets in order to support an ill or injured family member abroad. I have seen or been involved with dozens of tragic situations that could have been avoided if the proper insurance had been purchased. I think American Express used a commercial saying – “never leave home without it.” This is true for insurance.
What is the affect of mandatory medical insurance programs?
We have yet to see great effect from the mandatory scheme in Thailand in terms of claim trends and risk profile. It is too early for those returns. However, on the day the scheme was announced by the Thai government, our Thai company website experienced such a surge in traffic that it crashed!
We have since made adjustments to handle the new levels of inquiries!
Specially which challenges exist for international private medical insurers across Asia pacific?
There are many challenges which health insurers face in the region, some of which were mentioned above in relation to premium costs.
However, one of the biggest challenges which we face is the task of providing modern, helpful and efficient customer service. This challenge in itself takes on many forms throughout the health insurance client cycle, all the way from first consultation to claims through to renewal. Clients are demanding higher levels of service all the time, and with premiums, benefits and plan details being so similar from insurer to insurer, it really is down to your customer service when trying to set yourself apart from the rest.
We are looking to digitization to help is in this area, but your tech and digital efforts are still only as good as the people behind them. Clients in this region, on the whole, are new to the concept of IPMI. As such we rely on our staff to help them through their experience. It is much harder to keep a client and to build their loyalty than it is to focus on bringing in new business. There needs to be a balanced focus. With so many options in terms of insurance providers, clients have the power to shop around and demand better. It’s because of this that customer service standard is one of our biggest challenges.
How difficult is it in Asia Pacific to build a sustainable and robust international private medical insurance broker and intermediary network?
It is tough. It is one of those assets a company builds over time, one step at a time. To be bullet proof from high claims in a year a certain premium volume is needed to be built. In addition, medical providers require attention as they will charge as much as they can, with the client blaming the insurer not the medical provider for the high costs, and so we end up with the problem of trying to manage both the medical costs, the treatment, and the premiums in order to maintain balance. Intermediaries play a critical role in bridging the gap between the insurance and the need, between the medical provider and the insurer, as they are the ones to assist the client in understanding how to manage their coverage so the long-term needs can be met within the budget set.
At Pacific Cross we are lucky in the sense that we have had established operations in the region for decades already. Some of our largest producers are brokerage and agency firms with which we’ve had relationships with that entire time. They are experts in their areas and we enjoy smooth fruitful relationships with them. However, having said that, there are still some definite difficulties in growing your network, or setting up a network in a new territory.
To highlight one of the main difficulties we face I will speak to the vast number of ways which a distributor or intermediary appears. They come in the form of online only “compare sites”, IFAs, travel agents, real estate specialists and many others. In lots of cases, these intermediaries have no knowledge of IPMI, but they have a large prospect or client network who knows them. Couple that with a lack of regulation on insurance sales in some territories and it is possible to find yourself having to do business with an entity you may otherwise not. The result of this situation is mainly uninformed clients. Uninformed clients lead to contentious situations at claim or renewal time. Often it is the case that the person who sold the policy is nowhere to be found a few months down the road and the client is left on their own to sort through policy rules and details which should have been explained to them from the outset.
This can lead to not just unhappy customers, but a definite hesitancy on the part of the insurer to work with that intermediary going forward. As I mentioned before, Pacific Cross is fortunate to have a strong, established network of expert brokers and agent partners, but challenges do still exist.
Pacific Cross Insurance assist with the medical insurance requirements of corporations in the region including oil and gas and aviation. How does this market differ to that of the individual expatriate and business or leisure traveller market?
The oil and gas, aviation businesses traditionally provide a full comprehensive package for their expatriate employees. These insured people expect full coverage, they do not want any questions asked, and they wish full reimbursement, the companies pay the premium and the employees really don’t care, they are not willing to manage the outcome – treatment, price, or coverage. This compares to the general travelling client, or individual expatriate, who pays their own premiums and wants to have the necessary coverage but doesn’t need the full deal package. They are premium conscious and treatment conscious so are willing to help manage the outcomes.
With corporate entities such as the types you mention, there are both subtle and obvious differences when compared to an average individual customer. A subtle difference might be something such as the method in which an insured member makes contact with the insurer when in need of service – through a dedicated channel rather than a public one.
To me the biggest noticeable difference is the level of risk being covered and the custom benefits which are associated. In both oil and gas, as well as aviation, there are much higher levels of risk affecting the insured members on a daily basis. The companies employing these types of workers typically have a set list of requirements for the coverage they purchase, and as an insurance provider we try to work with these companies to meet those requirements as best we can. Because the number of members in a company plan can be large, they have a bit of negotiating power which an individual would not. We pride ourselves in being flexible to demands while also maintaining integrity in risk assessment and sticking to the principles of insurance.
How will the international private medical insurance market develop in Asia Pacific over the next 10 years?
100’s of millions mid-market people being educated and armed with high expectations for their families. They want what others have and they want the best of class. Governments can’t deliver to that expectation, so it is up to the IPMI industry to do that for the Asia Pacific consumer. The next 10-years will see even newer diagnostic testing and health & wellness come to the forefront - meaning lifestyle will play an increasing part as will genetic testing and screening. All of this recognizes the fact that preventive strategies are better than treatment when it comes to public health. The pendulum should swing away from treatment only, and now include health, wellness and lifestyle factors, with the treatment costs as a smaller part of the reimbursement equation. Coverage for life would be an expectation, mobility needs to be accepted, and the coverage should be collaborative – with the client and the insurer being closer aligned.
I see it as full steam ahead for the emerging insurance markets which were mentioned earlier – Vietnam, Thailand, Indonesia and later on nations such as Cambodia, Myanmar and others. This is both in terms of market penetration as well as provider competition. More and more global players have their eye on the IPMI market, specifically in Southeast Asia.
The market will mainly be driven by individual policies as health expenditures and disposable income rise in these places. This is good news for insurers, but also presents the challenge of a new savvy and demanding type of client. Building loyalty through high level customer service, reward programs, transparency and efficiency will help insurers thrive.
It is an exciting time to be involved in IPMI in Asia Pacific.
Last and not least, if you could live anywhere in the world, on land or at sea, where would it be?
I am currently living the dream. I live in Vietnam, in Asia, where we are surrounded by the sea, tropical temperatures, by fresh fruit and palm trees, and I can fly to a half dozen countries all within an hour‘s flight. My insurance knowledge is appreciated and recognized, market share increases and premium growth is often measured in double digits, and client count in the hundreds of thousands – an insurance industry professional’s dream.