Insurance rider premiums on the rise as claims continue to climb

THE pressure of rising claims continue to weigh on the five Integrated Shield Plan (IP) insurers, with two moving to raise rider plan premiums, and another expected to follow suit in the next few weeks.

Of the five IP insurers, Prudential has raised rider premiums, while Aviva will do so this April. Sources said AIA also has a similar plan.

The Business Times was told by the remaining two IP insurers - Great Eastern and NTUC Income - that they have no intention of raising rider premiums for now.

Riders are complementary products introduced by insurers to provide coverage for the co-insurance and/or deductible portions of the bill when claims are made under the IP.

These are not approved by the Health Ministry (MOH) for Medisave and are products paid for by cash.

Last June, the Life Insurance Association Singapore (LIA Singapore) had said that the IP insurers had agreed to freeze the top-up portion of all IPs for a year, following the implementation of the government's universal healthcare scheme, MediShield Life.

At that time, LIA also made clear that the IP insurers were unable to keep premiums of rider plans unchanged as claims experience have been higher than expected over time.

Four months later, Prudential raised its premiums for two kinds of rider plans by between 3 and 14 per cent, across the different age bands. One provides coverage up to private hospitals, while the other provides even more coverage - from the first dollar for hospitalisation, up to private hospitals.

Said Tay Jin Li, vice-president and head of product management at Prudential: "The quantum of increase is based on actual claims experience for the different profiles. Our combined premiums remain competitive in our core age segment, even after the price increase."

Similarly, Aviva's director of product and marketing, Daniel Lum, said only premiums for the rider option that covers both co-insurance and deductibles for private hospitals were raised by between 30 and 60 per cent, across all age bands.

Even after the re-pricing, the insurer noted that this particular rider option is still more competitive for some of the age bands, compared to the others.

Mr Lum said the premium increase was communicated to policyholders from end February and the raise would take effect from April 1.

While details are not known, BT understands that in the next few weeks, AIA is also expected to do the same.

When asked, AIA said: "As is our usual best practice, we will continue to closely monitor and assess our plans based on our claims experience to ensure adequacy of premium rates and the overall financial soundness of offering these policies.

We note that LIA Singapore had previously highlighted that, across the industry, the premiums of riders are expected to increase over time due to the claims experience being higher than expected."

Observers noted that the current freeze on all IP premiums lasts till November 2016. Thereafter, the insurers are expected to conduct their individual reviews to decide whether or not to raise 2017 IP premiums.

But with the escalating claims experience not arrested, policyholders might see higher IP premiums the next year, they pointed out.

Rising hospital charges, increasing number of hospital admissions and higher medical inflation have led to a bigger average claim size, which has narrowed underwriting profits from the IP business here in recent years.

This article was first published on March 15, 2016.
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