I’ve seen a number of posts on my Facebook Newsfeed this past week, commenting on the hikes in premiums for Integrated Shield Plans for many insurers, with one such firm (say, Company P) adopting a new pricing structure.
The new pricing structure ties the cost of premium renewals to an individual’s usage of the insurance plan, ie. those who make claims pay more, while others who don’t enjoy a discount. This works similarly to the No-claims-discount (NCD) offered on motor insurance for those with zero claims.
The heated debate from this move include agents from one company gloating over another company’s failure to control claims cost, or for raising premiums more than the one they represent.
Others opined and/or slammed Company P for ‘under-pricing’ their plans a few years ago to capture market share. Agents from Company P then defended their positions by clarifying how this new change is in effect good for policyholders in the long term.
There’s probably no right or wrong in this situation as it depends on one’s perspective.
What is the REAL problem?
However, I would like to offer my POV that perhaps, we are all barking up the wrong tree. I wrote about the expected premium increase in integrated shield plans in an article last year, and discussing the reasons for the increase and what we can do about it as individuals.
Therefore, if the increase in premium over time is expected, why are so many of us acting surprised? Why are some agents even making statements like, “Your premium increase is 20% while mine is 10%. That makes my company better than yours”?
(Sure, today his premium may rise more than yours, but tomorrow yours will rise more than his. It’s never-ending, so let us cut out this nonsense once and for all.)
None of these change the reality that premiums will continue to rise (and may even rise at an increasing rate) for all policyholders across every insurer unless we collectively work at controlling it.
Thus, I humbly suggest that the real problem is that people have not effectively planned for this increase in premium, and there is a genuine fear that we may not have the medical care we need in the long run.
How to solve the REAL problem?
I believe a better set of thinking is as follows:
- Control the rate of increase of medical claims by avoiding over-reliance on private medical insurance
- Plan and save towards the goal of fulfilling future premium payments
And I urge readers to revisit the article from last year about your increasing integrated shield plan premiums and what to do about it.
While we try to manage claims and therefore contain premium increase, by being responsible for our own health and being sensible in our selection of medical procedures, We cannot neglect the fact that premiums will continue to rise due to age-bands (premium for our shield plans goes up as we age) and medical cost inflation, which is usually higher than general cost of living inflation.
People need to be realistic and take this uncertainty into consideration while planning for their finances, say, for retirement planning or long term care planning. Talk to a financial planner if you need help.
Finally to my fellow practitioners, I know that it is not the sexiest thing to think/talk about. But sometimes we as advisors need to touch our hearts and have this un-sexy conversation with our clients; to still do our best to inform them of the (inevitable) increases in premiums and to discuss ways to plan for this increase, even if this means rationalizing with our clients to go for a lesser plan/hospital ward.
In other words, we want people to be adequately positioned over time to handle this increase, and not be panicking or gloating over such an event when it happens.
do you think it’s wise to keep the plan for now while I can still afford the premium, then downgrade next time when I’m older?
Thanks for the question. That’s definitely one way to look at it. I don’t think anybody can say for sure what’s going to happen to as-charged plans in future, ie. whether as-charged plans would continue to exist for decades.
Maybe it will be slowly phased out in the coming years through pricing strategies and pressure from public/ministers? Who knows?
What’s important though in my humble opinion, is to always monitor and review your needs, and plan for the uncertainties.