“Only a fifth of your insurance premium goes toward medical cover”

True medical inflation is only a fraction of what most expats are told, according to Rory Blair, Director of the Rbi Premium Membership Program.

Most expats mistakenly believe true medical inflation causes the increases in their insurance premiums. According to Rory Blair, Director of the new Rbi Premium Membership Program, however, the majority of that “medical inflation” is actually funding company overhead–particularly in claims departments.

Rory has spent 20 years selling insurance and has watched the cost of international medical insurance spiral upward at double-digit rates for more than decade. He gave Expat Health an insider look at premiums and talked about how how Rbi hopes to shake up the industry.

Rory, your website is very vocal about medical inflation, arguing the impact is overstated. How is that possible, given medical inflation is almost always cited as a key driver of premium hikes?

Some medical inflation undoubtedly exists. But when you break policies down and look at what’s going toward medical cover you see that part of it’s completely exaggerated. For someone in his 40s (which is the key target group for insurers) as little as 20-30% of his premium might go toward covering actual medical costs. Private insurers have to reward their shareholders otherwise they will take their money elsewhere.

Where does all that money go?

Some of it’s for the perks–the company cars, the big office building. But for a lot of insurance providers a large proportion goes to funding their claims departments. When you look at big multinational insurance companies the biggest department is almost always claims. The reason is that with premium prices being so high they resort to selling claims–when you sell claims you end up getting claims which have to managed.

Paying claims is certainly an important part of the business though…

Of course. But you have to look at what kind of claims are being paid. Most of the big companies that talk about margins shrinking are talking about it in terms of claims in the  USD 200-300 range. It’s not the big claims that hurt them so much, it’s the overwhelming number of smaller ones that can do a lot of damage.

Each and every claim has to be managed, which is why they have these enormous claims departments. Small claims slow things down, drive overhead up… all of that impacts premiums.

Your website claims you can deliver comprehensive medical cover with none of this inflation and no age-related increases in premiums. How have you tackled the problems mentioned above?

One key is to reduce the amount of small claims being paid. That doesn’t mean deny claims, but rather create incentive for members not to make small claims unless absolutely necessary. We do this partly through a no claims discount for members who do not claim during the year.

Another thing is reducing overhead. Right now we operate with 4 people. Our back-end administration system is completely automated and we contract out all of our other services (24/7, 265 call center operation and medical assistance services). This makes our industry footprint very small.

Finally, we leverage on excess capacity and capabilities of industry leading service suppliers which gives us a competitive advantage.

And you don’t predict a substantial increase in size as membership grows?

We’ve calculated that to provide our members with quality, individual attention we need to maintain a ratio of about 1 to 500. We invested in building the infrastructure to manage rapidly expanding membership base. We can upscale without concern of being able to meet the current and future needs of our members. We are well positioned to manage big volumes of business.

If the solution is so simple, why aren’t other companies doing it?

Part of it is a natural resistance to new ideas. On the broker side it’s interesting though because some brokers really don’t understand the structure of the products they are selling.

I worked selling these products for decades and I know from first hand experience that in many cases they only know about the brand and the product, but not necessarily anything about the providers.

I’ve had people tell me that Rbi is can’t be real and that it is not possible to to give someone medical coverage at such a low rate. That it can’t work. If that were true we wouldn’t be in business. We only use the very best and most capable insurance underwriters such as Lloyd’s of London, which is well known for paying claims. Lloyd’s has an A+ claims paying ability rating, which provides our members with considerable peace of mind.

So Lloyd’s didn’t share those reservations?

Lloyd’s expects to profit and they charge commercial rates for the coverage they provide. The fact is that we have all the mark-ups and overheads of an old-fashioned legacy business which enables us to do things differently.

To play devil’s advocate for a moment… one problem we’ve heard about from other industry players, specifically in Asia where you’re based, is local hospitals getting expat patients and seeing dollar signs. They may bill two or three times higher than normal. Do you have a strategy for countering this?

That is always a risk in this business. Again, here we’re relying on our experience and our personalized approach. We want to be dealing directly with hospitals.

When someone goes in to a care facility (such as a hospital or clinic), immediately our medical assistance service is talking to them. Up front we discuss and negotiate on cost. If they say something outrageous then we correct their costing or see where else we can treat the patient. There will be times of course where the patient can’t be moved, but we’re talking about very few cases.

One of the problems these big insurers face  is that in some cases they don’t deal with the hospitals immediately upon a patients arrival and throughout the care giving process. They see a huge bill when the claim is filed and they can’t do anything about it. It’s already too late.

And you can be flexible enough to ensure treatment at all these hospitals?

The way that RBI works is that you don’t just get a “health insurance card” like with most companies. Instead you get a membership card  and also a pre-paid, open-loop card that is run through either the Visa or Mastercard network. We call this our payment solution card.

This card is important as we are able to credit the card with funds at our discretion so that no matter where you go in the world, as long as the hospital accepts that card you are guaranteed to be able to get treatment. In fact even if the care giver is not credit card enabled we can also make payment direct to the care facility’ s bank account.

Either way it provides our  our members with complete piece of mind. They are kept out of the whole claims/payment loop and left to recover in peace from the ailment. This is also something that traditional insurers have so far chosen not to offer.

This payment system seems to mesh well with your definition of RBI as a “membership program…”

We’ve talked about Rbi mostly in terms of health cover, which I hesitate to do. Our vision is much larger than that. We want to build this into a true lifestyle benefits program where our members not only get varied types of insurance cover benefits, but also all the help they need to truly enjoy the new found expat life.

Currently new members get two complimentary two-day holidays,a concierge travel service, a virtual clinic facility (Dr. Global), the My Lifestyle online electronic health record facility, a cash back facility for a claim-free membership year and the benefits we have covered above.

As membership grows we will be able to provide better benefits, and build RBI into the only true expat lifestyle membership program.

Rory Blair is Director of the Rbi Premium Membership Program. He has worked in the insurance and investment industries for nearly 30 years, first at West End brokerage and later in private equity and oil investment in Thailand and Indonesia. For the past two and a half years he has been involved in the creation of the Rbi Premium Ltd. He currently lives with his family in Bangkok, Thailand. http://www.rbipremium.com

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