WHEN the Office of Fair Trading reports again on health insurance within the next few weeks, it is expected to repeat its demand for a ban on private medical insurance policies which are moratorium-based - where no medical history is required.
This news has led companies which sell these policies to mount a rapid rearguard action defending their approach.
They argue that a ban would restrict consumer choice.
Research they have conducted appears to support their case, and the companies have challenged the OFT to justify its
proposal.
Peter Dalby, managing director of Prime Health, said: ''The OFT appears to have undertaken little, if any, research and despite numerous requests from our parent company, Standard Life, (and others) we have not been presented with any justification for their recommendation to ban moratoria.''
The OFT's report will examine the progress made since its full investigation into this sector was published nearly two years ago.
There are two ways in which customers buying private medical insurance are taken on. The traditional method is ''full underwriting''.
Would-be policyholders are asked to provide details of their medical history, which the insurer may then follow up with a request for a GP's report or a medical examination.
On the basis of these checks, the customer is informed of any medical conditions which will not be covered.
Under a moratorium policy, the insurer does not require any
medical information.
Instead, an exclusion clause is applied to all medical conditions which the policyholder may have suffered, usually in the five years before the start of the policy.
However, after a certain period of cover, typically two years, prior illnesses may become eligible providing no further treatment of any kind has been received.
The OFT argued that this approach involved a number of drawbacks.
''Exclusions may not come to light until a claim is made, making it impossible to judge whether a particular policy offers value for money,'' it said.
Consumers with pre-existing conditions might be misled.
''In reality, few of those with pre-existing conditions may be able to fulfil the typical moratoria terms,'' said the OFT.
Worse still, it argued, consumers are given a clear incentive not to seek medical advice during the moratorium period which may be to the detriment of their health.
However, research undertaken recently on behalf of Prime Health and Norwich Union Healthcare among customers with both types of policies found that they saw the advantages of both moratoria and full medical underwriting - ''but above all they value choice'', concluded the research.
Kim Baker, commercial director of Norwich Union Healthcare, said: ''This research has clearly demonstrated that consumers do not want moratoria banned.''
Some traditional health insurers, such as Bupa, have never offered moratoria policies. Not surprisingly, they agree with the OFT.
Bupa's general manager for marketing, John Castangno, said: ''We do not believe moratoria are in the consumer's interests.
''It is much more difficult for all concerned when claims have to be rejected at treatment stage.
''It is better for customers to be clear at the point of sale what is and is not covered.''
He rejected the consumer choice argument.
''I would accept it if I thought consumers really understood what a moratorium policy involves, but I am not convinced they do. No matter how much you encourage them to read the small print, people rarely do.''
He argued that the main reason for having moratorium policies is to make the sales process easier.
''Customers can be signed up immediately or sold the policies over the phone as no medical information is required.''
There is no doubt Prime Health has done well out of selling moratorium policies.
Although it now offers both types, the majority of its customers still choose the moratorium approach.
A spokeswoman defended the principle and argued that many of the OFT's arguments are
unfounded.
For example, she pointed out that, contrary to the impression given, ''many pre-existing conditions are eventually covered''.
This is a major attraction to
customers.
Prime Health, which is a member of the Insurance Ombudsman Bureau, believes consumers do understand how the policies work. To back up its claim, it added that from 1993 to 1996, out of almost 100,000 claims, just 16 complaints went to the Ombudsman because of the moratorium clause.
Its spokeswoman said: ''The moratorium can only be considered as not in the consumer's interest if it is interpreted unfairly at point of claim.
''It is our contention that the very low level of complaints demonstrate that we and other insurers offering the moratorium do interpret it fairly.''
Other demands which the OFT is likely to repeat when it reports back are that private medical insurance policies should be presented in a common format, so benefits can be more easily compared and that there should be a warning about likely increases in premiums.
One of its suggestions was that an illustration should be given of how actual premiums might rise over the next five years.
The OFT does not have the power to force insurers to adopt its recommendations. However, the Government is likely to listen carefully to what this influential body has to say.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article