Laya takeover may see more health premium competition

After years in the doldrums, the health insurance market is starting to signs of renewed life.

The takeover of Laya Healthcare by international insurance giant AIG, announced today, is only the latest indication of vitality. In recent months, the six-year long exodus of subscribers has been turned around, premium increases have been pegged and the there have been some glimmerings of price competition in the market.

The key question for consumers, in relation to the AIG takeover and other developments, is: will it result in lower premiums?

The arrival in the Irish health insurance market of AIG, which has 88 million customers in 130 countries, shows the stable, if dormant, sector here is sufficiently profitable to attract international investors. For AIG, the timing is right, with economic prospects improving and a rise in the number of people at work. On a political level, the uncertainty posed by the mooted introduction of Universal Health Insurance seems to have faded as that can has been kicked down the road.

The upswing in the economy had resulted to a small increase - just 1,000 - in the number of subscribers in the third quarter of 2014, the first since 2008. Over the preceding six years, almost 300,000 people gave up their cover, mostly due to unemployment and an inability to bear ever increasing premiums.

The word is that the last quarter of 2014 will show a more substantial rise when the figures are released later this month, indicating that the corner may have been turned.

Minister for Health Leo Varadkar has said stabilising the cost of health insurance premiums is one of his top priorities in office. To achieve this, he has pushed forward a number of initiatives, including a reduction in stamp duty, lower premiums for young adults, Lifetime Community Rating and a reduction in levies.

Improvements for insurers

The measures are designed to improve the conditions in which the four health insurers operate, with a hoped-for knock-on effect of lower premium increases. Lifetime Community Rating, to take effect from May, will allow insurers to charge higher premiums to older people taking up cover for the first time. To attract new entrants, insurers are being allowed to offer discounts to younger adults, up to the age of 25.

Mr Varadkar initially sought a price freeze from the insurers, but was rebuffed. However, the previous era of double-digit increases seems to have passed, and prices are rising more slowly than for some years.

Talk of a price war, however, has been overstated; whatever increased competition there has been has taken place on the fringes or consists of short-term offers, for example on children’s products. What matters to consumers is the core cost of their premium and the amount of cover offered.

There are still too many products in the market - over 360 - too much confusion for consumers and too little choice. Too many consumers are needlessly paying for cover they will never use, and have to suffer co-payments and payment thresholds that take much of the good out of their cover.

AIG isn't new to Ireland; in fact, it has been here for over 40 years and employs 400 people in other insurance sectors and treasury. The press release announcing the takeover promised Laya's 500,000 customers would have access to "complimentary" products offered by the company. Sadly, this was a typo - access to "complementary" products is envisaged - but it may be as near as consumers get to a free lunch out of current changes in health insurance.