APRA's Geoff Summerhayes has responded to criticism of his recent speech in which he called on private health insurers to urgently respond to the twin challenges of declining affordability and membership.
In his speech to a Members Health conference, Mr Summerhayes criticised the response of some in the sector to these challenges, saying "some hard decisions need to be made if private health insurance is to remain an essential part of the Australian health system."
He said that without action the risk is that only three private health insurers will still have a sustainable business model by 2022 and called for an independent inquiry.
Members Health described Mr Summerhayes' speech as "inflammatory and ill-informed'.
Members Health said the speech "significantly damaged public confidence in private health insurance and shows how misguided the regulator is about the industry."
“Such inflammatory statements by one of the country’s most senior regulators has rarely been seen before. They have done significant damage to confidence in the private health insurance sector, especially the community-based funds that are so vital to regional Australia,” said CEO Matthew Koce.
“APRA needs to restore confidence in the industry and not pursue its blatant, self-serving agenda of ‘consolidation at all costs’.”
The Australian Private Hospitals Association also criticised Mr Summerhayes,
Michael Roff, chief executive of the Australian Private Hospitals Association, agreed, saying Mr Summerhayes' comments were "inflammatory", "ill-informed" and "potentially dangerous".
“These comments have the potential to damage public confidence in the entire private health sector at a time when the government is trying to enhance the value of the private health offering through a process of ongoing reform,” he said.
Both Members Health and the Australian Private Hospitals Association wrote to Treasurer Josh Frydenburg. Both of the associations expressed no confidence in Mr Summerhayes and one called for his removal. APRA reports to the federal parliament but its operation is independent of government.
In an opinion piece published in The Australian, Mr Summerhayes responded to the criticism by reiterating what he described as the key points of his speech, saying unless there is change "significant industry consolidation, particularly among smaller insurers, seems inevitable."
"APRA has no particular wish for this to happen. As with other sectors of the economy, the community benefits from a diverse and innovative marketplace, with a range of competitors jockeying to best serve their current and potential customers today and into the future," said Mr Summerhayes.
"Our purpose in sounding the alarm is therefore not to promote or encourage mergers among insurers, many of which have long, proud histories of service to the community, it is to urge them to take action so that they are well-positioned to continue to serve their members well into the future."