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Nordic withdraw from the International Health Insurance Market

Posted on May 06, 2013 by Sergio Ulloa ()

With Effect from the 1st of August 2013, Nordic Health Care will no longer be accepting plans for new business worldwide. The international health insurance wing of Europæiske Rejseforsikring travel insurance will attempt to cancel any renewals where possible, apart from those plans where renewals are contracted in which case, a significant 60% premium increase is expected upon renewal. Clients will not be left in the dark however, and Bupa/IHI will offer special continuation terms for all Nordic clients looking to change providers.

The low profitability of Nordic's international health plans played an important role behind the insurers decision to withdraw from the market, and as a result, all health care plans will be cancelled as well as all extra supplemental coverage such as additional travel, medical escort and summoning, dental cover and personal accident coverage. Nordic plans to cancel all existing policies; however, where contractually bound to offer continuation to clients, premiums will increase by approximately 60% so as to manage the large number of claims and still be able to meet clients' expectations of service. 

Nordic have stated that this will not cause any immediate loss of staff as the running of Europæiske Rejseforsikring's main travel insurance services will not be affected.  The insurer will now focus their resources towards their primary market, international travel, and are looking at this as a positive step in directing growth in this important market sector.

Nordic decided against selling their portfolio to another insurer, choosing instead to keep a dedicated team of staff to handle the maintenance of the plans until all clients' policies have been cancelled or passed on to another insurer. An agreement was made with Bupa/IHI that will allow for specific options and coverage benefits to be obtained by Nordic clients living in areas where Bupa/IHI offers cover. While this news will undoubtedly bring relief to some clients, Nordic plans were popular inSouth Americaand at present, Bupa/IHI does not extend a number of their services to the region.

Despite this, Nordic had their reasons for selecting Bupa/IHI for their clients, stating that: "We wanted a partner that, through its experience and knowledge of the international private medical insurance market, can offer our customers continued high quality services".

This service from Bupa/IHI will only be available for one year from Nordic's date of withdrawal. So clients who do choose to remain on their NHC policy at the first renewal after withdrawal will not have the ability to continue over to a Bupa/IHI policy in the future.

Beginning from the 6th of May, Nordic Health Care will begin to distribute general information to their clients about the cancellation of the policies, and 4 to 8 weeks prior to the renewal date, all renewal clients will be provided with what options they have.

Pacific Prime analysts have attempted to deconstruct the Nordic policies to theorise why the plans were not profitable and have highlighted what they believe are the main reasons behind the removal of the plans from the international market.

One possibility behind this could be that the medical underwriting offered for Nordic's plans was too lenient and that their policies towards premium increases were not quite in line with the market practises for international medical insurance.

When Pacific Prime and Nordic Health Care first began working together in 2009, Nordic's underwriters were offering cover for pre-existing conditions that no other insurer was able to offer cover for. Furthermore, they did this without applying the sufficient premium loading needed to meet costs that accompany the increased risks of covering pre-existing conditions. For example, there were cases where Nordic were offering coverage for certain chronic conditions in a high risk category with a premium loading of just 50%.

Of course, Pacific Prime were extremely happy to be to be able to offer such remarkable rates for cover that was unmatched by any other company, but the sustainability of premiums in the future was a cause for concern. Normally, when considering high risk chronic conditions, such as Diabetes type one, most insurers would decline cover. However, in the rare case that cover might be offered, the loading would need to stand around at least 100 - 150%. Today, many other insurers such as Bupa/IHI and Allianz also cover pre-existing conditions but coverage is matched with appropriate and sustainable premium loading.

Another offering unique to the Nordic plans was that initially, they guaranteed that the premium increase every year would be only 5%, about half the annual average annual adjustment for all other insurers. Furthermore, they also ensured clients that they would be able to stay in the same age bracket that they initially joined the plan on. So if a client joined at age 35, they would continue to pay a 35 year olds premium for as long as they remained on the Nordic plans. Again, this was a great selling tool for the Nordic plan, despite the risks for longevity.

Sadly, these reasons, along with the excellent levels of service and high claims payment ratio, accumulated to the plans no longer being able to offer sustainable coverage for their clients, proving how different the international insurance market is from local markets that are government backed and can guarantee yearly increases and frozen age brackets alongside plan sustainability.

Pacific Prime CEO, Neil Raymond, will soon be meeting with Nordic and Bupa/IHI to discuss exactly how the changeover will take effect, ensuring the best possible experience for all Nordic clients during this time, especially for clients in non eligible areas of coverage for Bupa/IHI, such as South America.

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