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Insurance prices rise despite payout falls
The COVID-19 pandemic has seen insurer payouts fall by $500 million, but Australian consumers are continuing to pay more, the consumer watchdog has revealed.
Insurance prices rise despite payout falls
The COVID-19 pandemic has seen insurer payouts fall by $500 million, but Australian consumers are continuing to pay more, the consumer watchdog has revealed.
The Australian Competition and Consumer Commission (ACCC) found that government-imposed lockdowns, which limited non-urgent elective surgery and non-urgent extra treatments, saw the cost to insurers fall compared with 2019 costs.
At the same time, average premium increases have continued to be higher than inflation and wage growth despite the fact that most insurers postponed their scheduled April 2020 premium increases for at least six months in response to the pandemic.
“The ACCC expects insurers to act on public commitments to return any profits gained from COVID-19 to policyholders, including through hardship measures such as premium waivers and discounts, and through the timely management of any built-up demand for non-urgent elective surgery,” ACCC deputy chair Delia Rickard said.
The report also noted that health insurance participation rates had continued to decline over the past year, as the proportion of the population holding “hospital only” or combined cover fell from 44.3 per cent in June 2019 to 43.6 per cent in June 2020.
“The overall decline in the proportion of people with hospital policies in 2019-20 was possibly due in part to the economic slowdown associated with COVID-19. However, some have asserted that the pandemic also reminded Australians of the quality of Medicare and the Australian hospital system, leading them to question the value of continuing to pay for private health insurance,” Ms Rickard said.
“While it is difficult to determine the exact reason why there was a lower proportion of people with hospital cover in the year ending June 2020, there is little uncertainty about the continued downward trend, particularly among younger age groups.”
The report from the ACCC follows data released by the Australian Prudential Regulation Authority (APRA) which showed that younger Australians are not signing up for new premiums due to the high costs associated with insurance.
According to the latest APRA data, the number of people aged 20 to 29 with hospital cover and general health insurance has dropped by 8 per cent and 5 per cent, respectively, over the past three years.
Despite charging more for claims and paying out less, APRA has found profits for the sector fell over the year.
Industry net profit after tax of $0.9 billion and return on net assets of 3.2 per cent were significantly lower during the year ended September 2020.
This was due to lower underwriting results from the catastrophic bushfire and storm events in late December/early 2020, and large falls in investment income mainly from the negative impact of the COVID-19 pandemic on investment markets in the March quarter.
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