Individual and SME Pacific Prime clients will see large annual increases in 2013 across the Cigna Global Expat plus plan, recently acquired from Van Breda and now undergoing a re-branding to the Cigna brand. While most international insurers have published annual increases well below the 5 year trend for 2012, (Allianz Worldwide Care, Bupa International, Aetna Global Benefits and AXA PPP) these latest increases from Cigna on the Expat plus plan will leave most clients very disappointed, and Pacific Prime analysts suspect that most policyholders will put this down to the takeover of their policy from Van Breda to Cigna.
Pacific Prime clients on the Cigna Global Expat plus plan will see an increase of 29% on their premium for all renewals in 2013 and in specific markets it is understood this could be as high as 50% (Hong Kong, Singapore, China). This cannot really be considered as medical insurance inflation, which is clearly not running at this level anywhere in the world, but more of a market pricing adjustment. As a result, clients are sure to question whether this increase would have still have occurred under Van Breda and if Cigna bringing in its own 'economic model and costs' to run the Expat plus plan is to blame.
Cigna purchased Van Breda in August 2010 in a reported USD 300 - 400 million deal. At the time of the purchase, Van Breda was essentially a market leading NGO / INGO medical insurance provider; Pacific Prime analysts believe this was the main factor behind Cigna's acquisition of the company. However, the purchase of Van Breda also saw Cigna gain ownership of Van Breda's small individual and SME international style health insurance plan called Expat Plus. In total Van Breda was believed to have covered approximately 700,000 people under their global medical insurance products, the acquisition of the organization by Cigna is a clear indication of Cigna's global international health insurance ambitions. Cigna, not unlike other major players including Bupa International, AETNA, and AXA PPP, are clearly placing increasing importance on the international market segment and the purchase and recent re-branding of Van Breda is just the latest step in the continuing trend of major providers looking further a field for growth opportunities.
Since the acquisition, it has become unclear whether the takeover has proven beneficial for either Cigna or Pacific Prime clients with Van Breda policies. The premium market adjustment for 2013 will leave many clients in despair and create numerous client management problems for Pacific Prime, who are preparing for a backlash in sentiment come renewal time. Van Breda was also the previous home of the NATO contract, perhaps the world's biggest global medical plan at an estimated premium of 100 Million USD. However, this has subsequently moved to Allianz as of early 2012 therefore significantly diminishing the size of the former Van Breda portfolio. In addition, the changes in premiums across the personal and small corporate plans will most likely lead to numerous clients seeking other options as well.
Mr Neil Raymond, CEO of Pacific Prime put the proposed premium increases in to context for Pacific Prime and it customers; "The dramatic change in premiums is going to be very disappointing for our clients who will likely put this huge increase down to the Cigna acquisition and consequent re-branding. We normally prefer insurers to adjust premiums in a more balanced way rather than in such a dramatic jump. If the portfolio is not performing well, we understand something must be done but I think such a big increase in one year with no obvious reason is a mistake, clients will think this is the hand of Cigna".
Medical insurers are sometimes required to make 'market adjustments' with pricing that is above and beyond normal medical inflation. It is generally understood that when the loss ratio of a plan portfolio is fundamentally wrong then it is not sustainable but making this dramatic adjustment sends very negative signals into the market. Allianz Worldwide Care made a similar type of adjustment in 2006 due to maternity losses and although it was able to recover, Pacific Prime (one of the leading global distributors of AWC) had to invest tremendous resources into managing the adjustment - explaining to clients what had happened and why.
Neil Raymond explained "when Allianz made the market adjustment in 2006 it was very tough on clients and we invested a lot of time with each client to help them to understand. At the time, Allianz was fortunate that their plan administration and claims settlement department was performing well so clients did not want to move. More importantly, Allianz did not change their brand. My concern with the Expat plus premium jump is clients will associate this negative change with Cigna, not with the benefit premium balance on the plan. This Cigna premium jump is going to be much harder for us to explain".
Pacific Prime's analysis of the Expat plus plan revealed that the substantial increase in premiums is in fact justified to a degree when benchmarked against competitors. Mr Owen Ryan, from Pacific Prime's Operations team stated; "the Expat plus plan has normally been great value for money and its claims settlement is one of the best in the market, we encounter few problems here. There are admin issues on the plan though, principally because it is run on a 'European style' basis whereby the premium adjustments always occur on the 1st of January even if you renew later on in the year. This concept is often very hard to understand for most clients". As such, the premium levels for the Expat plus plan in 2013 are more in line with the other key competitors but it is still going to be a hard pill to swallow for clients.
Another issue which is likely to cloud the impending premium increase is that Cigna has recently launched its own new global type health plan named 'Global Health Options'. This new plan has in reality been running in competition with the former Van Breda plan, Expat Plus. Pacific Prime has expressed concern that the client perceptions of the dramatic increase in Expat plus will spill over to the overall perception of Cigna and consequently impact the Global Health Options plan.
Mr Raymond commented further on this; "Cigna has a lot of things going on in the international private medical insurance market with global and regional plans having been recently launched in the past and we understand there is still more in the pipeline. I think the management of the old Van Breda portfolio needs to be considered carefully as this will impact the Brand". He went on to note "Cigna clearly has the ambition and capability to be a leader in the iPMI market and we fully anticipate this to happen but managing all parts of the portfolio around the world is key, in reality they may be run as separate P&L but they are also under one Brand. We do not want to see another case of AVIVA in Hong Kong". Mr. Raymond refers to the unfortunate action of AVIVA pulling out of the Hong Kong high medical market, abandoning all clients on renewal (regardless of cancer or heart diseases). AVIVA's disorderly departure from the market was shocking to those inside the industry and even more disturbing to those outside it.
In the medium to long term, Pacific Prime remains very positive about the potential for Cigna to be a major player in the market. However, the current Expat Plus adjustment will be a test of how far the Cigna brand can carry and support a plan in the wake of negative news for policyholders.