Whatever you are selling, appealing to new, younger customers is key to your success. This has certainly been the case for the drinks industry, with many of the long-standing brands such as Gordon’s Gin and Johnnie Walker revamping their marketing messages to ensure their products’ longevity.

The same is true for the medical insurance industry. “We do need to attract younger people,” says Nick Lipczynski, partner with medical insurance specialists IHC. “We’ve still got a fairly predictable medical insurance market with an average age well into the 40s. Tapping into the younger age groups would have significant benefits for the market.” Not only would this increase market penetration for medical insurance but, as medical insurance is a product that once used is rarely given up, attracting younger people now will have benefits for year to come.

Additionally, by extending cover to younger, and potentially healthier lives, the risk pool would also be improved. For instance, although it has only been in the market for a year, PruHealth says that its younger customer base has helped it limit premium increases. Dave Priestley, sales director for PruHealth, explains: “Seventyone per cent of our customers are under 45 compared with an industry average of 45%.

Having these younger, healthier customers has meant our first rate review was an average increase of 5.5%, lower than the average for the market.” But although there are these benefits, few insurers are actively targeting the younger age groups. Indeed, with recent product launches from both AXA PPP healthcare and Standard Life Healthcare aimed at the over 55s, the marketing focus is firmly on older people. “Interest in medical insurance tends to start when someone is in their early to mid-40s,” says Julian Ross, head of marketing and communications at Standard Life Healthcare. “At this age people become more aware of health issues and are more likely to take out cover so it is sensible to target products and marketing at them.” Jan Lawson, managing director of Private Health Partnership, believes this is a missed opportunity. “The industry isn’t really doing enough to target younger people.

Recruitment tends to consist of offering continuation of underwriting terms plus a discount when they come off their parent’s policy,” she says.

And while these discounts, which can be as high as 40% of the standard premium, can be attractive, continuation of underwriting terms should really be the clincher. “Maintaining an exclusion-free policy is really good but I suspect most people don’t understand this. We should be explaining this more,” Lawson adds.

But even with a better explanation of why being young and healthy when they first take out the policy will mean they will have better cover in 40 years’ time, there are still plenty of other reasons why younger people are not taking out cover.

First, potential health problems rarely feature on younger people’s agendas.

“People in their 20s and 30s think they’re invincible, especially before they have a family,” says Lipczynski. “Why would they want to take out cover if they’re not going to need to use it?” Cost is another issue. Saddled with student loan repayments and facing the prospect of saving for a mortgage deposit definitely makes medical insurance a low priority for many young people.

Additionally, their experience of healthcare delivered through the NHS is unlikely to make them see medical insurance as a priority. For most young people, the only healthcare they will have received through the NHS will have been from their GP and possibly through accident and emergency.

Both of these are areas where the NHS delivers a good level of service.

This view is supported by political rhetoric. The government’s reform of the NHS is high profile and has already delivered improvements in some areas of healthcare, for instance reduced waiting lists and improved cancer treatment. On top of this, the Conservative Party’s recent U-turn on incentivising people to go private could be seen as another indication that the NHS is in a good state of health. “We were taken aback by David Cameron’s change in policy,” says Ross. “Funding is a serious issue for the NHS and will become more so after 2008 when the current funding plan finishes. It would make sense for a government to start making more positive signals about contributing towards the cost, especially as the concept of self-provision is fairly well accepted among the younger age group.” Perhaps in preparation for the time when the government accepts some form of self-provision is necessary, the insurers are beginning to explore ways to attract younger people.

PruHealth has probably made the biggest in-roads into this market, attracting a younger than average customer base. Priestly believes the gym discount on its product has been an important factor in achieving this.

“We’ve found that a lot of people in their 20s and 30s aren’t buying medical insurance because they think they’re going to need to claim, it’s because they want the other benefits such as reduced gym membership and the ability to receive your premium back if you don’t need to claim,” he says.

Other insurers are also dabbling with the gym incentive now. BUPA offers discounts to members of its Fitness Connection chain of gyms, which includes Fitness First and Esporta, while AXA PPP healthcare has a reciprocal agreement with LA Fitness. “We offer LA Fitness members 10% discount on our range of products and our members can enjoy 10% discount on their gym membership and they won’t need to pay a joining fee. This deal is open to all ages but we do find that the audience is younger,” says Victoria Georgalakis Hardy, head of strategic marketing at AXA PPP healthcare.

As well as looking at health-related hooks for younger customers, insurers are also weighing up the type of policy that will appeal, with opinion split between cutdown, tailored benefits and fully comprehensive plans.

In favour of cutting back benefits to make medical insurance more attractive, Lipczynski says that these products should focus on benefits such as physiotherapy. “Do they really need extensive cover for cancer and the other conditions that tend to affect older people?” he questions. “This would give them benefits that they could use.” Certainly there is some evidence that younger people do want different things from their medical insurance. Martin Smith, sales development manager at BUPA, says that on its Heartbeat product, younger people tend to go for the health conscious options such as screening. “We also find cash plans appeal to this age range as they offer benefits for optical, dental and physiotherapy – all of which are things that will be used.” Several product features already reward customers for their healthier lifestyle. No claims discounts, offered by Standard Life Healthcare and AXA PPP healthcare, help to stabilise premiums if someone does not need to claim. Likewise, the new lifestyle underwriting methodologies from AXA and BUPA take into account factors such as weight and smoking habits when determining premium.

But while some see a targeted benefit product as offering the potential to extend appeal to younger ages, other believe comprehensive cover is just as important for this age group as for any other. “Younger people are more demanding,” says Ross. “I think they’d want a product that gave them all the cover they needed so there was no hassle when they made a claim.” This fully comprehensive cover can then be tailored to fit budget through the use of excesses as Charlie MacEwan, a spokesman for WPA, explains: “Insurance is about a mix of self-pay and helping people to indemnify themselves against high risks. An 18-year-old taking out a £1,500 excess on our XSHealth product would pay less than £60 a year for the reassurance that they would be looked after if something major happened to their health.” He adds that this affordability has made it a popular option among students.

Products also need to suit the way younger people access healthcare according to Lawson. “The big downfall with medical insurance for many younger, healthier people is the requirement to see a GP to access treatment. They don’t want this hassle. They just want to go to the physiotherapist for instance and get the treatment they need,” she says.

Although removing the GP gatekeeper could potentially open the product up to abuse, Lawson believes this would not be the case. “This type of arrangement is standard in the cash plan arena and I don’t think it’ll be long before a provider is brave enough to incorporate this mechanism into a medical insurance policy,” she adds.

Arguments about product design may just be arbitrary though, with greater success coming through more targeted marketing of these age groups. The gym connection does appear to be working and AXA’s Georgalakis Hardy says she has also had some very good results from inserts in magazines aimed at younger age groups. “Traditionally we’ve seen magazines that appeal to older age groups, for example gardening magazines, as the best way to attract new customers but we’ve also had some success with magazines such as GQ and Men’s Health,” she says. “There is interest out there but it’ll take a different approach to attract these new customers.”

Paul Roberts
proberts@ihc.co.uk
www.ihc.co.uk