Health insurer nib expects premiums will rise by four to five per cent a year in future and says premium rises can’t just simply be compared to the inflation rate.
Chief executive Mark Fitzgibbon says premium increases not only reflect the cost of healthcare services, but also the increasing use of those services as the population ages.
“I think we have to accept that people are going to pay somewhere between four and five per cent more for their health insurance into the future, but we have to deliver them greater value for that four to five per cent,” he said on Monday.
Consumers are set to get slugged with premium increases well above the inflation rate, after the federal government approved rises set to start from April 1.
nib’s premiums will lift by an average of 4.48 per cent, below the industry average of 4.84 per cent.
Mr Fizgibbon said he is frustrated with the comparisons of the premium rises to the consumer price index (CPI).
“CPI just measures the cost of a good. What we’re seeing in this sector is more goods being consumed and we have to price that in and fund it,” he said.
On the other hand, if insurers kept lifting premiums by four to six per cent each year and were still selling the same product, consumers would become bothered, he acknowledged.
The health insurer on Monday reported a 65 per cent lift in its first-half net profit to $71.1 million, after the number of policyholders in its core Australian business rose 2.1 per cent – representing more than half of all industry policyholder growth.
nib shares closed 39 cents higher, or 8.3 per cent, at $5.10 in a lower share market.
nib’s margins and profit benefited from a “benign” level of claims, but claims now appeared to be moving higher towards longer-term trend lines.
Mr Fitzgibbon said nib’s core Australian residents health insurance business will likely achieve even better policyholder growth in the second half, but profitability is unlikely to be as strong.
He expects market conditions for the health insurance industry to remain soft.
Industry growth in the 2016 calendar year had been quite anaemic, but the medium- to long-term growth prospects were positive, depending on what happens with the economy.
Mr Fitzgibbon also said the healthcare and health insurance sectors would become increasingly globalised, and there was likely to be increasing interest in Australian healthcare assets.
Equally, nib was interested in opportunities overseas, particularly in Asia given its proximity to Australia.
MORE POLICYHOLDERS BOOST NIB PROFIT
* First-half net profit up 65pct to $71.8m
* Revenue up 8pct to $1.0 billion
* Interim dividend up 2.75 cents to 8.5 cents, fully franked