As of August 1st 2013, international private medical insurance provider Nordic Health Care will discontinue issuing new plans, marking the insurers exit from the market. Nordic, a health insurer under Europæiske Rejseforsikring's travel insurance, will also no longer be accepting plan renewals that are not contractually obligated.
Plans which are contractually obligated to be continued will see premiums increase by about 60%. Despite the disappointing news, Bupa International has announced they will offer Nordic customers special conditions and terms if they choose to switch to Bupa coverage. One of the key reasons that Nordic has decided to exit the market is in regard to the low profits they have experienced. This decision will see an end to their health insurance plans and supplemental coverage options for benefits such as dental, accident insurance, travel insurance and other similar benefits. As the company begins their departure, they plan to cancel all policies where possible. As for policies that are not easily cancelled, Nordic has announced premium increases of about 60%. The company attributes this high increase to the increased cost of managing claims for fewer numbers of policy holders so that the company will be able to maintain similar levels of customer service.
Representatives of Nordic have indicated that staff numbers will not likely decrease in the foreseeable future, as the travel insurance group under Europæiske Rejseforsikring will remain unaffected. Nordic's withdrawal is seen as a way for the company to move more in the direction of international travel insurance, which is their primary market. The company sees this as the best possible move right now.
Nordic had other options, such as offering to sell their portfolio of customers to a different insurance company, but thought it best for their own staff to handle the maintaining of the policies until all remaining policies are cancelled or have been taken over by another insurer. Nordic has been working with health insurance giant Bupa International on an agreement that will allow for previous Nordic customers to have access to some options as well as coverage benefits. While the announcement and collaboration with Bupa is good news to many, customers in South America, where Nordic plans were fairly popular, may find less options as Bupa does not have as extensive amounts of coverage options for the continent.
Although options may be limited for their South American customers, Nordic is confident in their collaboration with Bupa. Representatives from Nordic have issued statements saying that they wanted Nordic customers to be able to work with a international private medical insurance provider that has thorough experience and is highly regarded for their customer service. Thus, they opted to work with Bupa International.
Customers should take note that the Bupa's service and plan transfer option will be available for just one year after Nordic withdraws from the market. For Nordic customers who remain on their current plan, they will not be able to continue their policy with Bupa after the year-long grace period.
Nordic started sending information to customers regarding their exit from the market in early May, and customers will receive more information about policy cancellations anywhere from 4 to 8 weeks before their renewal date. During this time, customers will receive information regarding what their options are in terms of future coverage.
In looking at Nordic's policies, Globalsurance analysts have concluded that there are a number of reasons as to why the company's plans were not profitable, thus resulting in the company's exit from the industry.
One suggestion is that Nordic's plans were too lax and lenient when it came to their medical underwriting and that the company's policies regarding increases in premiums were not on par with their competitors in the international health insurance industry.
At the outset of Nordic's working with Globalsurance in 2009, Nordic often times included coverage for pre-existing conditions in their policies, a practice that very few international insurers do. In addition to providing coverage for many pre-existing conditions, Nordic offered this coverage without adding the necessary premium loading.
Providing coverage for pre-existing conditions increases risk exposure for the insurer and therefore, increases costs as well. Premium loading is a method used to offset these costs. In some cases, Nordic would offer coverage for some chronic conditions and the premium loading amount was only about 50%. When compared to how their competitors handle similar situations, the difference is significant. For example, someone diagnosed with Type I Diabetes would either be denied coverage or would be offered coverage with premium loading of about 100 to 150%. Nordic's rates, which were often one-half or one-thrid that amount, were far below industry standards. While Globalsurance representatives were thrilled to have these plans on offer to customers, many saw these plans as highly unsustainable, leaving cause for concern.
Another way that Nordic set itself apart in the industry, unfortunately to their detriment, was guaranteeing annual premium increase of only 5% when their competitors averaged almost twice that amount. In addition, Nordic promised customers that as they aged, they would be able to stay in the same age bracket as when they initially joined. For example, if a customers started a plan with Nordic when they were 30 years old, their premiums would reflect those of a 30 year old for the entire time they were insured on the policy. While these were all attractive benefits and great ways to sell the plans, they did not help promote the company's longevity.
While the company offered high levels of customer service and quick claims services, Nordic's approach to coverage proved to be unsustainable. Unfortunately, the company and the industry learned the hard way how the market for international health insurance is much different than a government-backed approach which is able to guarantee annual increases and that is able to sustainably provide coverage.
Neil Raymond, Globalsurance's CEO will meet with representatives from Bupa and Nordic in the coming weeks to go over the details of their collaboration. He hopes that in being a part of this shift Globalsurance representatives will be better equipped to assist customers with the changes, especially clients that are in areas where Bupa does not have coverage, particularly in South America.