Healthy outlook

THE FRIDAY INTERVIEW/Oliver Tattan Vivas Health:Oliver Tattan's office is located on the sixth floor of the Vodafone building in Sandyford, south Dublin. As brands go, Vodafone is one of the best known in Ireland, but Tattan believes that his company, Vivas Health, the third insurer in the market, is "up there with Vodafone on brand awareness".

However, unlike Vodafone, Vivas doesn't have the same share of its market.

It has been playing catch-up to VHI, the semi-state market leader which controls 76 per cent of the health insurance market, and Quinn Healthcare, Seán Quinn's company which bought Bupa earlier this year and which has about 17 per cent of the market.

Given how the health insurance market is expanding and how Vivas's business has grown since it started in 2004, Tattan believes Vivas could potentially be earning €450 million in premiums by 2010.

"We are heading for 150,000 subscribers and would expect to be well over 200,000 by the end of 2008," he says. "The 150,000 puts us at 7 per cent market share by year end. If we can get to that position in three years from zero, we would expect to more than double that in the next three years."

Tattan was last night rewarded for his efforts in expanding Vivas when he won the Ernst & Young emerging entrepreneur of the year award. He feels he can expand the company further in a growing health insurance market that could be worth €6 billion by 2010; the market is worth €1.5 billion now. He says the market is more than doubling every five years and he offers the figures, not just to show what Vivas could yet make, but what other insurers entering the market could earn.

Tattan is all for increasing competition and encouraging more rivals to enter the market.

"Ultimately you need more competition between providers. We need more hospitals, private beds and primary care clinics."

The uncertainty created by risk equalisation - the system through which other insurers would compensate VHI for having an older and therefore more expensive customer base - is stopping international insurers entering the Irish market, he says, and the Government has failed to offer them incentives.

He believes the Government should force VHI, the dominant player in the industry, to reduce its share of the market, following the same measures taken to increase competition in the energy market with ESB.

"I think 40 per cent would be a reasonable market share for VHI to have. You would then have active encouragement for new players to enter the market. You need Axa, Friends First and Irish Life - those kind of players - to be in the health insurance market.

Tattan believes the Government should introduce new wide-ranging policy strategies for healthcare, like those it has introduced in software and financial services to guide the development of these industries.

He believes a developed healthcare market could create 20,000 jobs at a time of rising unemployment and falling exports, while creating more revenues for the exchequer and more services demanded by the public.

"We have taken a very ideological approach to health, in that it is a social service provided for free to everybody equally by the Department of Health," he says. "It has been locked in that space and hasn't really been viewed as a potential employer or contributor to the economy. It needs to be taken out of there.

"We are in a business space where we are trying to grow business and employment and create revenues for the exchequer and don't want to be wrapped up in debates on a two-tier public-private system in healthcare."

Vivas's offer to the market - it allows its customers to choose health packages that suit their situation - has proved popular.

It earned premiums of €29.7 million in 2006, compared to €9.2 million in 2005. Tattan says it is on course to bring to this figure up to more than €60 million this year.

He says the company is ploughing any money made back into the business and has not had to ask its shareholders, AIB and financier Dermot Desmond, who between them own 65 per cent of the company, for more money, beyond the initial €12.5 million capital investment required to get the business going.

Tattan wasn't surprised when it was reported last week that the majority of Quinn Healthcare's 400,000 members would be affected by an 18 per cent increase in prices from the start of next year. Vivas and VHI have both increased premiums in recent weeks. Tattan blames medical inflation for the increases.

"We are paying more to live longer. Medical inflation is running at about 8 per cent a year. There is an ageing population and the biggest drivers are new technologies and facilities."

Tattan says the new private hospitals planned on public hospital sites in the Government's co-location programme are needed, given that only three major private hospitals have opened in the last 20 years.

However, he believes VHI's stranglehold on the market creates uncertainty over whether the hospitals can survive.

He says the semi-state company will supply 80 per cent of the revenues in the insurance market and can decide not to insure these new hospitals, leaving the bankers and investors financing them in a precarious situation.

"We are being hit twice," says Tattan. "First, VHI is completely exempt from solvency rules and has no reserves to carry. Our members are paying the PRSI and health levies. They are paying for a free public system they don't use. We are taking them out of that loop which is benefiting the public system."

Age: 43.

Family:married with four children.

Lives:Enniskerry, Co Wicklow.

Position: chief executive, Vivas Health.

Something you might expect:Tattan is health conscious; he climbed to the base camp of Mount Everest in April to raise awareness for men's cancer.

Something that might surprise:he has poured his weight in gold. While working in a South African gold mine in the 1980s, he found and smelted 87kg of gold, his weight at the time.

Hobbies:walking and reading.