APRA: Claims costs driving premium increases


In a speech yesterday to a Members Health event in Sydney, APRA executive board member, Geoff Summerhayes, said it is important the debate over the affordability of private health insurance be "informed and correctly focused".

"APRA does not consider industry profits or capital levels to be the primary drivers of rising premiums," he said.

"The underlying cost of Australia’s health system is the ailment; rising insurance premiums are just a symptom. Specifically, the fundamental forces pushing premiums up are higher claims costs experienced by insurers, through such factors as a greater uptake of medical services among policyholders and the rising cost of treatments and procedures.

"It is very much in the community’s interest that the current reform process continues, and private health insurers need to be an influential voice in that debate."

His comments come just days after Labor committed in government to cap premium increases for two years, at two per cent per year, while the Productivity Commission reviews the industry.

The industry has slammed the Labor proposal. It will welcome the prudential regulator's comments given their strong backing for the role of rising claims costs in premium increases.

Mr Summerhayes said affordability would likely worsen as more healthy young people opted out of private health insurance.

He also announced a package of proposed measures designed to further strengthen the governance of health insurers through an extension of prudential regulation.

“As the affordability of private health insurance declines and younger, healthier policyholders leave the system, effective decision-making is vital to keep funds sustainable and able to pay their members’ claims into the future,” he said.

“These reforms will strengthen resilience by increasing the likelihood that boards, senior managers, auditors and actuaries will identify and take decisive action on emerging issues. We also expect policyholders to benefit through a reduction in the risk of failure arising from fraud, mismanagement, or other undesirable practices.”