Surge in claims drags some Integrated Shield insurers into the red; higher premiums expected

Business Times

23-06-2025

[SINGAPORE] A double-digit surge in claims is putting pressure on the profitability of Integrated Shield Plan (IP) insurers, raising the spectre of more premium hikes.
For six IP insurers, net claims surged by between 9 and 27 per cent last year, due to medical cost inflation and higher claims particularly among older policyholders. Four out of seven IP insurers posted underwriting losses in 2024. Those in the red were Income Insurance, Singlife, HSBC Life and Raffles Health Insurance (RHI).
The only one to show a decline in net claims – of 18 per cent – was RHI. General manager Ben Siah said that RHI takes 'a disciplined approach to adjudicating claims, ensuring that claims paid out are reasonable and customary'.
'Continued discipline will be increasingly important due to the persistently high inflation in medical claims costs,' he added.
Income went from an underwriting profit of S$16.1 million in 2023 to a loss of S$49.5 million in 2024 despite raising premiums across the board last year. The insurer said that its premium adjustments were introduced gradually from the third quarter, and it would take time for the impact to be fully reflected.
Income's 2024 IP performance was hit by higher claims costs due to medical inflation, 'higher incidence and severity rates due to an ageing population, and a backlog of claims from 2023 caused by delayed processing by medical institutions that flowed into 2024'.
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Singlife's losses deepened from S$26.2 million in 2023 to S$59.7 million in the following year.
Helen Shen, Singlife group head of products, noted that it made a provision in 2024 'based on (its) worsening claims experience'. 'This allows us to better manage our financial position in the short term and our financial resilience in the long term.'
The standout is Prudential, whose underwriting profit more than doubled from S$11.4 million in 2023 to S$25.3 million in 2024. Prudential was the first in the market with claims-based pricing in 2017, which has apparently helped to rein in the overconsumption of healthcare.
Prudential chief health officer Sidharth Kachroo observed that product design, such as co-payment and claims-based premium pricing, 'has been important in encouraging the mindful use of healthcare services'. 'Customers who don't make any claims enjoy premium discounts at their next policy renewal and we have received feedback that they appreciate this discount,' he noted.
Great Eastern's (GE) IP portfolio reversed from a loss of S$44.9 million in 2023 to a profit of S$4.8 million in the following year. AIA was also profitable last year at S$7.2 million, though the underwriting profit was lower than the S$12.7 million previously.
AIA said: 'While we observe some changes in our underwriting profits from the previous year, it's important to view this within the context of our substantial portfolio, which exceeds S$900 million in premiums. Our overall profitability levels remain relatively consistent between the two periods.' Like other insurers, it cited medical cost inflation, but also singled out 'hospital and facility-related charges'.
At least three insurers are raising premiums. For Singlife, the adjustment is across its portfolio by an average of more than 10 per cent.
HSBC Life's adjustments for 2025 apply to its private-hospital base plans and riders, 'in line with industry standards', said the company's chief health officer Manu Tandon.
Prudential is raising premiums for two private-hospital riders. AIA and RHI said that they are still reviewing their options. It could not be confirmed if GE is raising premiums.
Increasing medical costs
Based on Mercer Marsh Benefits' survey of insurers in 55 markets, the medical trend rate – defined as the year-on-year increase in claims – puts the expected 2025 rate for Singapore at 11 per cent, lower than the Asia average of 13 per cent.
Asia's trend rate is pushed up by outliers such as the Philippines (21 per cent) and Indonesia (19 per cent).
Aon's expected medical trend rate for Singapore, net of domestic inflation, is 11.5 per cent in 2025.
Public-hospital bills are not spared from claims inflation.
Prudential said: 'We have seen an upward trend in the number of claims and average bill sizes from both public and private hospitals over the last few years. This trend continued in 2024, where the volume of claims increased by over 15 per cent from 2023.'
Alex Lee, president of the Singapore Actuarial Society, said that as a product category, long-term medical insurance is running at 'near break-even' for the IP insurers taken in aggregate, based on returns filed by insurers with the Monetary Authority of Singapore.
'If medical cost continues to rise, insurers will have no choice but to raise premiums because there is hardly any pricing buffer left in the rates being charged if premiums are not raised,' he added.
'Macro factors such as a shortage of medical professionals, supply-chain disruptions, and medical innovations are systemic issues faced by all consumers of healthcare, and therefore all insurers. Switching of insurers does not shield policyholders from these macro factors.'
A GE spokesperson noted that the insurer's profit margin is just 0.8 per cent of earned premiums, but that medical inflation exceeded 10 per cent.
'Therefore, an upward adjustment in premiums is inevitable, but raising premiums alone is not the solution. The bigger challenge is addressing medical inflation driven by a mindset of 'buffet syndrome' consumption, which is why we are continuously refining our product proposition to encourage more conscious consumption among customers in terms of their treatment choices,' the spokesperson said.
GE recently took the market by surprise when it temporarily halted the issuance of pre-authorisation certificates for policyholders seeking admission into two hospitals – Mount Elizabeth and Mount Elizabeth Novena. The insurer said that based on its like-for-like comparison, bill sizes at these two hospitals were 20 to 30 per cent higher than at other private hospitals.
GE said of its return to profitability: 'The annual review of our IP premiums has contributed to the improved financial performance of our IP portfolio, supported by premium revisions made (last year), more disciplined annual reviews of premiums, and efforts to reduce distribution expenses.'
Last year, it rolled out two riders designed to encourage 'conscious consumption', where the S$3,500 deductible is not covered.
'As healthcare costs continue to climb, fostering a more mindful approach to healthcare consumption will be key to ensuring long-term sustainability and affordability for all policyholders,' the spokesperson noted.
Singlife's Shen said that the firm has already raised premiums this year 'across (its) portfolio by an average of over 10 per cent for increased healthcare consumption'.
The insurer has also implemented some initiatives, including working closely with medical providers to manage claims costs 'through negotiated fees and pre-agreed treatment packages'.
'This approach helps keep overall bill sizes in check while ensuring policyholders receive quality healthcare without unnecessary financial strain,' said Shen. She added that the firm also introduced no-claims discounts of up to 20 per cent for eligible policyholders 'to encourage healthy lifestyles and responsible healthcare usage'.
Insurance advisory Havend's chief executive Eddy Cheong said that higher premiums are a 'foregone conclusion'. 'Policyholders need to be realistic about their healthcare expectations… If this trend (of higher premiums) continues, more seniors will downgrade or give up their IP to fall back on to MediShield Life,' he observed.
'Considering this, you should first weigh your healthcare expectation with your financial ability in IP decision-making, more so for retirees and those transiting into retirement. Even within the same hospital benefit level, the premium rates can range widely across the seven IP insurers.'
Its compilation of lifetime premiums for private-hospital IPs range between S$360,000 to S$900,000, including riders. 'Hence, you should also find out what additional benefits your IP plan is offering you to justify the additional premium.'