The new rules, introduced by the Financial Conduct Authority (FCA), will affect a wide range of policies – including motor, home, travel and medical insurance. It will oblige providers to include text in their renewal communications which encourage us to shop around for the best deal, and to advise those customers who have renewed a policy with them on four consecutive occasions that they may be able to find more competitive cover elsewhere.

That seems like sensible advice on the face of it, but the new rules could well cost consumers dear and have caused widespread alarm among some insurance brokers, with many calling upon the FCA for one product, namely Private Medical Insurance (PMI), to be excluded.

As the cost of medical treatment and covering new technologies continues to put pressure on health insurance, it is understandable that many policyholders have become focused more on the price of cover and the savings they can make by moving to an alternative insurer than the features of the policy they are being offered or the quality of cover they may be giving up.

However, when the FCA’s new rules come into play there is a very real risk that policyholders will be encouraged away from their longstanding broker – someone who understands their medical history and the specific conditions they need covered – and end up being advised by someone considerably less well informed, and who in some instances may be motivated more by the commission they can earn on a particular policy than the need to identify the most suitable cover.

Without adequate explanation consumers could very well be sold a ‘moratorium’ product, where no declaration of their previous medical history is required. In making such a switch, there is a risk they could lose the cover they have enjoyed for a range of pre-existing conditions for good.

The new rules are also likely to result in many searching online for more competitively priced cover, without taking advice as to its suitability. Buying the wrong kind of motor cover might mean you don’t have access to a courtesy car when you need it, but having the wrong kind of cover really isn’t where you want to find yourself when it’s your health that’s at stake!

Consumers have enough problems navigating complex medical terminology during the application process for PMI, but if it wasn’t already confusing enough comparing different benefits schedules and policy limits, the presence of ‘no claims discounts’ included within the pricing of some PMI plans – a feature we at CS Healthcare are strongly opposed to – makes the potential use of eye-catching low initial premiums a real concern when the new rules come into place. PMI is a three dimensional product, where customers need to consider not only the price, but the benefits and any underwriting, which might exclude pre-existing medical conditions. Focusing on just one of these factors at renewal is likely to present a significant risk.

The questions you should ask at PMI renewal

The new rules do not come into effect until next April, and there is no obligation whatsoever for policyholders to switch broker, but when policyholders start to consider their options in the field of medical insurance, there are three key questions they should ask themselves:

1. Does the pricing of my existing policy include a ‘no claims discount’? This means your individual claims experience is taken into account when your policy is due for renewal and a premium discount may be applied if you have claimed below a certain threshold or not at all during a policy year.

2. If a broker or intermediary is recommending an alternative PMI policy with a new provider what is the basis of the pricing? Does the premium include a discount to reflect ‘no claims’ that may result in significant increases in future years if you need to make a claim?  Also, are there any other introductory incentives or promotional offers that only apply during the first year, making the price look artificially attractive?

3. What type of underwriting or review of pre-existing medical conditions will apply when considering a switch to a new provider? Cover for medical conditions or claims which have been made on an existing policy may be lost when moving to a new provider.

 James Parker is chief executive of private medical insurance provider CS Healthcare