A healthy outlook

In the 18 months prior to June 1994, the company now known as PMI Health Group lost £550,000. With a head count of 45 and a yearly turnover of £1.2m in commission, it would have been forgivable to predict its demise.

Chris Baldwin, father of current chief executive officer Matthew Baldwin, was the company's landlord. Having made a success of concrete and fencing businesses, you could also be forgiven for asking why a man with no previous financial services experience decided in June 1994 to invest in the company and take a controlling interest.

Reflecting on his father's decision, Matthew explains: "There was a significant risk in investing in this business but he saw the opportunity."

Fast-forward 15 years and the company is now comfortably profitable. "We had to aim for profit but you cannot do that overnight," says PMI's managing director, Richard Munro. "The following year we lost £200,000, then £100,000, then we started making a profit in 1997/98."

Originally formed in 1986 as Private Medicine Intermediaries and renamed Medical Management in 1992, the company rebranded as PMI Health Group in 2005 to better reflect its multi-layered offering of health insurance broking, claims management and occupational health services.

The two men agree that the previous owner had very good ideas - some of which are still used today - but they had not been balanced with a pragmatic business approach. Munro reflects: "If it had concentrated on the medical insurance side, the business could have worked."

PMI Health Group now offers three service areas and a consultancy-style approach to delivering health cover for its 1,600 clients. With 140 staff, it generated turnover from broking of £6m last year. The bulk came from medical insurance but the company also offers cash plans, employee benefits, risk products and commercial insurance.

It also made £2m in claims management and £800,000 in occupational health. For medical insurance, the broker uses a selection of insurer panels - amongst whom are Bupa, Aviva, Standard Life and Simply Health - to place its core business.

Each customer places an average of two contracts and PMI has ambitions to generate extra contracts, particularly for commercial insurance for clients with a turnover of up to £20m.

Baldwin says: "Broking is part of our business but it's also how we can expand into the rest of a client's business; we can benefit it by controlling its costs."

Corporate interests

Managed Care, PMI's claims management service, is a prime example of how the company helps large corporate clients manage their costs.

Targeted at firms with 200 employees or more, the service co-ordinates medical services to reduce costs. For example, employees can phone one of 12 nurses employed by PMI to discuss medical issues.

PMI's Cheshire office, a converted barn with low-slung oak beams and neat brickwork pathway, makes an impressive setting for the interview; the building has been extended several times to cope with its growing tenant.

Munro explains the stages of the evolution, highlighting the fact that while the company did not jettison any lines of business, it succeeded by renewing its focus on its core offering. He says: "Initially, it was a question of keeping the overheads under tight control and not taking any risks. We didn't develop any new services for about eight years."

Once the company had been stabilised, investment followed. Munro recalls: "We invested to improve the infrastructure: we installed a networked computer system about nine years ago and became more efficient, more modern. Then you look for better-quality staff."

According to Munro, one area that did not need to change was the company's attitude towards customer service. He says that PMI has built on strong foundations in this respect but that there is no room for complacency; the company has steadily re-structured its operations to be able to retain its focus on customer service as it grows. The continuity of relationships has underpinned the process, as Munro details, "It is a team-based approach. Clients will see our account manager - depending on how big they are and their requirements - up to six times a year."

He continues: "The account manager is backed by a team underneath them: an administration person, an insurer membership person, a customer service person. They are not doing all the work themselves."

Baldwin, who joined as chief executive officer in 2007 (his father is now a non-executive director), has the remit to build on recent steady and consistent growth with the aim of doubling its profitability over the next five years.

Internalisation

As part of the process, the company has moved its telemarketing operation in-house. It has expanded the team from one person to six and stopped using external companies. Baldwin explains: "It is about securing the appointments. With them [the telemarketers] being in-house, they understand what we are doing as a business." The company started a major telemarketing push in September 2008 and has seen appointments more than double since then.

Medical broking sits in a curious position. As President Barack Obama is finding in the US, health insurance is a contentious issue: it is not a product likely to see a reduction in its costs. With every technological and pharmaceutical development, costs tend to rise. From a broker's standpoint, this can often mean clients choosing between increasing premiums or decreasing cover. Munro believes that this dichotomy is key to keeping the sector competitive: "The way companies react is to get somebody else to look at it."

Despite the challenges and the added pressure of the recession, PMI is proud of having the highest client retention rate in its history. Focusing on customer communication has been a key driver according to Munro: "We need to make sure we completely understand what the customer wants - that's critical. You can't assume what they want - you have to understand it."

For some companies, that can be the lowest price while for others it involves paying more for a higher quality. PMI has clients from Aberdeen to the south of England that range from individuals to large corporations such as the RSPCA, Gap, Lindt and H&M.

The management is confident that few others can match its offering. Baldwin says: "One in five of our staff is medically trained; there's not going to be any other broker with that. Our doctor is award winning, our operations director is a medically-trained nurse. The length of service of the employees here goes into providing a good service. Our sales director started off as a Youth Training Scheme guy."

By curious co-incidence, the day of the interview is the 16th anniversary of Munro joining the firm. With an average length of service for directors of 12 years, Baldwin is proud of the staff that he believes will deliver its projected major expansion over the next five years. It is clear in his voice when he concludes: "You have to look after your staff; they are key."