For Integrated Shield Plan insurers, raising premiums should be a last resort
But what I found sobering in my perusal of Integrated Shield Plan (IP) insurers' accounts is the strong double-digit increases in net claims. The data points were extracted from insurers' 2024 returns filed with the Monetary Authority of Singapore.
For six IP insurers, net claims rose by between 9 and nearly 28 per cent in 2024, compared to 2023. This suggests bill sizes and claims are rising at a clip far faster than medical inflation, estimated at 10 to 11 per cent. The exception was Raffles Health Insurance (RHI), whose net claims fell by 18 per cent. RHI entered the IP market around 2018, and likely has the smallest policyholder base.
On the face of it, the factors driving the surge in claims are also obvious. The biggest culprit is cost inflation due to salaries and advanced medical treatments including more sophisticated screening technologies, among other things. Second is an ageing population who use healthcare more frequently and intensely.
Third is over-charging by private hospitals. Great Eastern's (GE) temporary suspension of pre-authorisation certificates at two Mount Elizabeth Hospitals is symptomatic of this. GE has said its own like-for-like comparison shows bill sizes at the two facilities are 20 to 30 per cent higher than other private hospitals.
Fourth is wastage, which is not transparent and surely, not insubstantial. Mercer Marsh Benefits' survey of 225 insurers across 55 markets hints at this. Among Asian respondents, 'inefficient and wasteful care' (68 per cent) is the third-biggest concern, after 'high-cost claimants' (87 per cent) and new cancer therapies (74 per cent).
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Asia's medical trend rate – defined as the year-on-year increase in claims – is projected at 13 per cent for 2025, higher than the global average of 10.9 per cent. Singapore's medical trend rate is 11 per cent.
Rising claims have taken a toll on IP insurers' profitability. Four of the seven IP insurers are in the red, and some have begun to raise premiums this year.
Given that IP insurer's profit margins are thin, higher premiums may well be inevitable. But with the frequency of premium hikes to date, it should be a last resort and not the first lever to pull. Already, measures are in place to curb over-consumption, including claims-based pricing by some insurers. Insurers should also take a hard look at costs – both internal and external. These include management and distribution expenses. A pattern of outsized bills sizes is another red flag.
GE's suspension of pre-authorisation certificates has provoked an outcry, but I applaud them for taking action to dampen over-charging. Insurance, after all, is a risk-pooling mechanism. Less than 20 per cent of policyholders in an IP risk pool makes a claim in any single year, as the Singapore Actuarial Society pointed out in a paper on IP portability last year. They dutifully pay premiums and suffer premium rises.
There is a greater benefit for the entire risk pool when charges are reined in for the sake of more sustainable premiums in the long run. Left unchecked, escalating premiums may well force people out of IPs altogether, which would neither benefit them nor the risk pool itself.
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