Has the insurance industry failed our youth?
After reading Charlie Weston’s Irish Independent article relating to the 26% rise in health insurance premiums of one of the primary health insurers in the Irish market, I couldn’t help but think about our recent blog piece about Mary. Mary is a 30 year old single female finance graduate from Cork, working full-time in financial services in Dublin. She is a health and fitness conscious lady, lives an active and healthy life attending Pilates, going for runs and eating healthily. Mary is disheartened by the manner in which she is dealt with by insurers, the constant rise in premium that has priced her out of the market and the fact that she is unable to leverage her healthy lifestyle to purchase cheaper, personalised and better insurance cover.
Reading about continuous premium increases confirms how our current insurance system has failed Mary terribly.
In 2007, the average health insurance policy would have cost the average customer €671, whereas the same policy would cost the same individual €1,047.71 in 2012. The Consumer Price Index fell by 0.3% between 2008 – 2012, so how have increases in premium been so significant during this period, without any material challenge?
Insurers have stated that the average claim per insured has increased by 12.6% per annum between 2008 and 2012 – however we at WeSavvy believe that this does not tell the entire story. The insurance system, particularly health and life assurance products, has historically been founded on the principle that young policyholders subsidise older policyholders. With continuous premium increases, we now find ourselves in a scenario where young potential policyholders are penalised and they are dropping out of the system or won’t enter the system in the first place. In 2008 there were 2.21 private health insurance customers aged 18-39 years old for every one customer aged over 60 years old. By the end of 2012 the number had dropped to 1.54 customers.
The house of cards is beginning to crumble and we need to fix the fundamentals within the system. In order to maintain a system where all can participate, where there are no barriers to entry and where claims can get paid, we need to ensure that there are sufficient young healthy policyholders purchasing health insurance annually, while at the same time encouraging all policyholders to engage in active and healthy lifestyles which will lower the number of claims arising, and in turn keep premiums low.
At WeSavvy, we understand that in order to address these, and many more issues, we have to look at the fallacies within the current system. WeSavvy is working on an innovative model and approach to insurance, which focuses on prevention and loss control, rather than concentrating on indemnification (payment in the event of a claim). With this in mind, we don’t believe in penalising young policyholders whom will form the bedrock of our system. Instead we are focusing on incentivising young policyholders, like Mary, to join the health insurance system and stay active and healthy to reduce their claims in the future. With this, we will empower young policyholders by giving them more control over their premium and personalised cover.