Private health insurers are split on the need for a big hike in premiums this year to keep pace with rising health costs, as low claims and soaring policyholders reflect a sector in rude good health.
Two of Australia’s largest private health insurers, Medibank and Nib, delivered full-year results last week that show Australia’s private health insurance industry had a great year, buoyed by a post-pandemic environment where customers prioritise their health.
Younger, health-conscious customers are helping private health insurers keep claims under control. Credit: iStock
Nib’s earnings soared as it grew policyholder numbers by 4.7 per cent for the year ending June 30, 2023 – nearly doubling the private health insurance sector’s growth for the year. And the worst hacking event in corporate history failed to stop Medibank, our largest private health provider, from adding new customers in the June quarter – barely six months after the attack.
The growing base of young customers, combined with a pandemic-induced dip in customer claims for health expenses, increased the gross profit margin for the industry by 17.6 per cent last year, according to data released last week by the Australian Prudential Regulation Authority.
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The regulator said claims costs increased just 2.4 per cent last year compared to premium growth for the sector of 3.3 per cent driven by membership growth.
Nib chief executive Mark Fitzgibbon has clearly flagged to investors and analysts that the sub-3 per cent premium rises of recent years will no longer be possible in a health environment where inflation is starting to bite. He will need to convince the federal health minister Mark Butler, to approve any premium increase.
Conversely, Medibank’s David Koczkar is not convinced claims growth is recovering from its COVID-induced malaise just yet. “I can’t speak for others, but when I look at our underlying claims, growth of 2.6 per cent expectation for FY24, that will be the basis upon which we review our premium increases,” he said.
“Unless there’s a significant change in that, I expect the premium increases will remain relatively lower than where they were, as an industry, four or five years ago, which was about five or six per cent.”
