Pacific Prime reviews IPMI inflation
Health insurance specialist Pacific Prime has reviewed the methodology used in its annual IPMI industry reports, and explained that care should be taken when drawing hard and fast conclusions from data
The company’s reports set out to outline the rates of inflation among major insurers in various regions around the world. Part of the impetus behind the further analysis was to evaluate the methodology used when reporting inflation rates. The new report demonstrates a requirement for clarification between the data used in regards to promotions and discounts, taking them into account rather than omitting their significance by removing their impact on premium inflation analyses. The advisor deemed it ‘more beneficial to interested consumers to reflect true pricing at the time of our reporting to give a more accurate depiction of the current landscape of the market’. The article makes it clear that this decision left some numbers open to interpretation due to the final figures being presented with an emphasis on inflation percentage. This explanation was given to a query on how some insurers have a seemingly high inflation percentage rate, which may not be an accurate reflection of a given year’s rate.
The first example of this came in Pacific Prime’s position for William Russell, who appeared to have the highest annual inflation of the year among insurance companies covered within the report. The advisor showed that, at first glance, there could be an assumption that William Russell simply raised premiums at a greater rate than others. However, the issue becomes clear when the context of temporary promotions given as an additional discount to Pacific Prime clients is explained.
Pacific Prime stated that they used this discounted rate as data for the annual IPMI inflation report, which was not truly indicative of William Russell’s published book rates. When the promotion ended, the data was ‘artificially exaggerated’ and could not be considered a true representation of William Russell’s actual inflationary rise between 2013 and 2014. They highlighted that William Russell actually had the second lowest average inflation rate in 2013, and the lowest average inflation in 2012. As a result, Pacific Prime was keen to acknowledge that the percentage increase was not indicative of actual premium price, and expects a return to lower inflation rates in its 2015 report.
Asian premiums to rise
Elsewhere, Pacific Prime has said that international private medical insurance (IPMI) premiums in Asia could rise by as much as 15.4 per cent annually. The company attributes this increase to ‘the growth in high-net-worth local citizens, the ageing local populations of high-net-worth locals, and growing or stable populations of expats’.
With emerging markets in Asia responding to the region’s rising income levels, there are more people spending money on healthcare services. This leads to a demand for better healthcare services and an improved quality of life. A study from Swiss Re predicts that overall gross written IPMI premiums in Asia will triple from an estimated US$9.4 billion in 2013 to a forecast $31.8 billion by 2020.
In Asia’s emerging markets, the resources for healthcare cover have in the past been sourced through government taxation or through individuals opting for private care via personal savings. However, to rely on these avenues today has become difficult as advancing technologies and medicines have rapidly increased the price of healthcare services, particularly in circumstances where public resources are strained. IPMI is potentially an underused service; in 2012, private health insurance covered under 10 per cent of total healthcare spending in the main emerging markets. A comment from Pacific Prime’s CEO Neil Raymond highlights this: “The rise in demand created by these combined factors is not yet being met in high-cost Asian countries through the creation of new high-end medical facilities.” In emerging Asia, governments have, however, begun to recognise the importance of IPMI as a potentially significant growth area.