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Help! My health insurance premiums increased by 100%
An insurer in Singapore recently announced that their rates will be increasing premiums by up to, and beyond, 100% for clients at renewal. While rare, large increases can and do happen. It can be frustrating to have this happen to you and could lead to a lot of serious questions that need to be answered. In this article, we aim to discuss the reasons why your health insurance premiums will increase, what healthy inflation should look like, and your options when an increase is unreasonable.
What causes a drastic increase in health insurance premiums in Singapore?
Regardless of the type of health insurance you have secured, you will see your premiums increase. It might not be with every renewal, however, if you have a plan for more than a year or two you can be sure you will see an increase in what you pay for coverage.
Why? Well, in truth there is a very long lost of reasons as to why insurers increase their premiums. Reasons will vary by insurer, plan, year, location, external market conditions, claims submitted, and more. That said, you can generally narrow down seemingly large increases to a relatively small number. Here are the three most common causes of drastic health insurance premium inflation in Singapore.
1. The renewability terms are different
All health insurance plans have terms around how renewing coverage works. Generally speaking, there are two different types of renewal provisions that can be employed by health insurers:
- Lifetime renewability – The insurer will renew your policy either for life or up to a certain age (usually 65).
- Renewability upon mutual agreement – This clause allows the insurer to review and change the benefits/premiums/terms for your own specific personal contract at renewal.
These clauses highlight the fact that it is important to carefully read and review your plan’s documentation before agreeing to secure coverage. If your plan has a renewable upon mutual agreement clause in it, the insurer will review your claims history at renewal.
For example, say you are diagnosed with bowel cancer. The insurer will pay the claim (as long as it was covered), but upon renewal of your own personal policy they could do something like increase the premium by 200% and put a 20% co-pay for further related treatment.
In most cases, insurers offering lower quality plans with low premiums will utilize the mutual agreement clause, while well established and stable insurers will utilize the lifetime renewability clause.
2. The insurer has misjudged the market
In many cases, this is a big red warning sign for our advisors. In an ideal world, insurers would be able to accurately predict how any health insurance plan they create will perform in Singapore. This means that your premium increases will be on par with the market, and reasonable.
Unfortunately, this is not always the case. In the past we have seen insurers launch a product in the city that looked great on paper. The problem is, they misjudged how people who purchased the plan would use it, and ended up seeing a much higher than expected level of costly claims.
In other cases, we have seen insurers operating at consistent losses (whether due to mismanagement, poor performance, poor service, etc.), and take steps to try to save their plans, and allow people who have purchased their plans to maintain coverage.
Regardless of the reason, every time we see a situation where an insurer has misjudged the market, the result is the same: Either a pull-out of the plan from the market or drastically increased premiums.
When we see an insurer double premiums (as mentioned above), this to us is a massive warning sign that the insurer is in trouble, and could be facing solvency issues. If you see your premiums have doubled at renewal, it is highly recommended that you be very wary of this insurer, and talk with us. We can work with you to find a solution (as we discuss below).
3. You moved up an age bracket
This is the other main reason as to why you might see a large premium increase at renewal. Almost every health insurance plan on the market sets their premiums based on age. As you get older, your premiums will increase. In some cases, insurers will create age bands that contain the same general premium.
For example, males aged 31-35 will pay the same premium for the same plan. The next age band up (36-40) will pay a higher premium.
If your plan is priced based on a band, and you move to a higher band, you will see your premiums increase. The thing to be aware of here is that the older you get the higher the increase will be in between bands.
Historically, we have seen insurers moving away from this pricing strategy as it is not sustainable and the jump in premium can be enough to force people to move plans.
What does healthy inflation look like?
A doubling of premiums is not healthy, and in many cases is rare. However, inflation of premiums will happen. The question to ask is what can be considered health or normal inflation?
To answer this question we produce a yearly report on International Private Medical Insurance (IPMI) inflation. The 2018 report is coming next week (April 20), and contains an in-depth look at Singapore. While you will be able to read all about inflation in Singapore soon, we can share a couple figures with you now.
In 2017, the average inflation of IPMI premiums in Singapore was 6.0%. This figure itself however, does not provide an accurate enough picture of health insurance inflation – after all, it does vary year-to-year as you can see in the chart below.
That is why in this year’s report we have included the Compound Annual Growth Rate (CAGR) of IPMI inflation. For Singapore, the CAGR of premiums from 2009-2017 was 8.66%. From this figure, we can see that inflation around 10% per year would be more normal. In fact, we believe that health insurance premium inflation from 0% to 20% for many plans, and up to 30% for plans with maternity coverage, is within normal limits for Singapore.
Anything above this figure is cause for alarm and means you should consider looking into why your premium has increased so much.
What options do I have if my premium increase is unreasonable?
Drastic premium increases are not ideal. If you believe that the increase you see when you go to renew your plan is unreasonable you do have a number of options. Here are four of the most common.
- Renew – This might not seem like a good idea, but if you have developed an ongoing medical condition, or have a pre-existing condition it might be one to consider as switching insurers will likely result in your conditions not being covered.
- Downgrade your plan – If you feel that you aren’t using all of your benefits then this might be an option to consider. You can opt for a plan with lower benefits or try to introduce a copay or deductible to reduce your premium.
- Move insurers – This is also an option, assuming you have not developed ongoing medical conditions or you’re ok with them not being covered/a waiting period being applied.
- Talk with Pacific Prime Singapore – Before you do any of the above, however, you should talk with an advisor at Pacific Prime Singapore. We know the market and have strong relationships with insurers in the city. As such, we can help you to review your options, and identify whether the insurer is worth staying with or not.
To learn more about health insurance inflation, check out our blog next week for the release of our latest report. In the meantime, if you see a large increase in your premium, contact us today to go over your options.
With over 5 years of experience in the field, Suphanida spends the majority of her day synthesizing complex pieces of insurance-related information and translating this into easy-to-understand, engaging, and effective content across a variety of media such as articles, infographics, whitepapers, videos, and more.
Suphanida is also responsible for planning and publishing three whitepapers released annually by Pacific Prime: The State of Health Insurance Report, The Cost of Health Insurance Report, and The Global Employee Benefits Trends Report. Additionally, she handles the LinkedIn profiles of Pacific Prime’s Founder and CEO, as well as Global HR Lead.
Suphanida’s strengths lie in her strong research and analytical skills, which she has gained from her BA in Politics from the University of Warwick and Erasmus Mundus Joint MA in Journalism from Aarhus University and City, University of London.
Being of Thai-Indian origin and having lived, studied, and worked in Thailand, the UK, and Denmark, Suphanida also has a unique, multicultural perspective that helps her understand the struggles of expats and globetrotters.
Outside of work, she enjoys traveling to new places and immersing herself in different cultures.
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