understanding opportunity and risk

minimising future risk       creating sustainable advantage       creating opportunity

HEALTH INSURANCE June 2010

Without a doubt, the provision of healthcare paid for by insurance is a major route for the delivery of healthcare. Rightly or wrongly, this is set to increase dramatically, as the cost of healthcare increases, as the population increases, as demand increases ... and public health systems crack beneath the strain of cost effective delivery.

Private healthcare insurance will increasingly fill the gap.

However, one of the main barriers to the further spreading of private health insurance is the cost. Increasingly companies are being expected to pay for this as part of the overall salary package of an individual. Increasingly, as general costs rise, personal private medical insurance is out of reach to the individual. This is a further gap in the market - people who want PMI but just can't afford it or can't justify the cost when there are so many other competing pressures. And make no mistake, these other competing pressures will increase over the next few years and the global economy re-aligns.

Also, make no mistake, the fact that some public health systems are increasingly failing to deliver what they promise combined with the increasing number of people who cannot afford PMI will mean an overall decrease in the effective provision of healthcare - regardless of where the population is.

So ... why is PMI so expensive? Why can't there be a low cost and effective PMI to cater for this widening gap in the market?

Is it company profit?

Is it the actual cost of healthcare and the high salaries of doctors or the cost of medication / treatment?

Is it a high number of claims in relation to members?

Well ... the above factors are naturally a part of the problem but by no means the most major one. The most major factor is a hidden one, and one most PMI companies will rarely admit to. Most PMI companies have chaotic internal organisation that leads to:

• high costs (back office systems, transactional activity, silo management and poor information sharing resulting in high risk, re-inventing the wheel)
• low level of innovation
• low level of information based business intelligence

In an increasingly commercial and changing world PMI companies will increase their profit, struggling to gain a greater market share and inputting a great level of resources into up front revenue generation. They know, as we all do, that balancing the books does not just mean trying to earn more money. A large part of the equation comes from cutting costs and becoming more effective at managing our budgets. Running to stand still, earning more money while your costs proportionally increase does not lead to a higher profitability. This is a basic in business.

From experience, it is very, very clear what these companies need to do to increase their profitability, to increase their impact and consequently increase healthcare provision. This is about creating a sustainable commercial advantage. It's about breaking out of the old ways of working and seeing the world as it really is. This is about working smarter, not harder.

However, also from experience, many of these companies also carry with them a high degree of arrogance. They often have the mistaken belief that they will survive and develop simply because of who they are and they've been in the market for so long. Senior managers in the business areas of these companies can often be heard to state: "We are the experts. You can't tell us anything.". Massively big mistake. The world is changing. One day the dinosaurs ruled ... next day they didn't. These days business survival and progression isn't about how large a monolith company is ... it's about the fast beating the slow. The slower you are, the higher internal costs you carry with you, the less flexible and responsive you will be to the required changes - and your market share will be eroded.

Evolution isn't about survival of the strongest. It's about the survival and development of those with the greatest responsiveness to change, and who can harness that change to create benefit.

Regards

JS
 

If you don't understand the risks, how can you prepare? Can you afford to let the issues be blurred?

The turbulent 21st century

life isn't black and white

central@alt3.co.uk