THE bad news that policyholders of Integrated Shield Plans (IPs) had been bracing for has come to pass. Between September and October, five insurers will raise IP premiums – mainly for private hospital plans and mostly in double digits.
The five are AIA, Singlife, Income Insurance, Great Eastern and Prudential.
Income Insurance, however, is raising premiums across all ward types. For restructured hospital plans, this is the first hike in nine years. It has enhanced cancer benefits for private hospital and Class A plans and riders.
• Why are insurers raising premiums?
Ageing demographics, advancements in healthcare, and medical cost inflation are conspiring to raise healthcare costs and claims. For IPs in particular, profitability has been an almost constant challenge. Up until around 2019, almost all insurers incurred losses on their IP portfolios. Ironically, profitability improved with the onset of Covid-19 in 2020 – largely because the pandemic caused people to postpone non-essential procedures. But such procedures have since resumed.
Prudential saw a higher volume of claims and “significantly larger” average claim sizes in 2023 compared to 2022. There was also a rise in claims of large bill sizes of S$100,000 and above. The largest of such claims was for cancer treatments at private hospitals.
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• Why is the trend worrying?
Income said its overall claims inflation rate of up to 25 per cent – for 2023 and Q1 2024 – far exceeds the medical cost inflation rate of 10 to 13 per cent. Since Income’s IP portfolio was profitable in 2022 and 2023, the move may be preemptive; Income described it as a “strategic measure” to maintain its portfolio’s long-term sustainability.
Prudential’s median IP claims cost also rose by 22 per cent in H1 2024 from H1 2023. Prudential will raise private hospital premiums in October.
At this rate, IPs might become unsustainable if premiums stay the same, particularly for private hospital plans. But affordability is increasingly a challenge. Based on data compiled by Havend of total lifetime premiums (age 1 to 100) for private hospital IPs plus riders, the total premium payable could well exceed S$700,000. In fact, for some IPs, the rider premium alone could be nearly twice the base plan.
A Raffles Hospital spokesperson said raising premiums alone will not mitigate underwriting losses in the long run. “More effort must be taken to cut wastage and optimise efficiencies in care delivery.”
• How can data on lifetime premiums help you take stock of your IP?
Eddy Cheong, chief executive of Havend insurance advisory, said people tend to look only at the premium they are paying currently. “But as the premium increases with age, it is prudent to also consider how much the IP would cost going forward from now till age 85 or beyond, and whether you have the resources to keep up with the premium. If not, it may be better to manage your healthcare expectations and downgrade to a more sustainable plan for the long term.”
• Should you maintain your rider or downgrade it?
Cheong said the purpose of riders is to reduce out-of-pocket expenses by waiving a portion of the deductible and co-insurance. Since the Cancer Drug List took effect, however, riders have become the avenue by which cancer benefits are enhanced beyond the caps imposed on base plans. “Since cancer treatment in private hospitals tends to be more costly than in public hospitals, having a rider for a private hospital plan seems more essential as the cancer benefit (of the base plan) may not be sufficient.”
There are of course lower-value riders for private hospital plans. Great Eastern rolled out a private rider, Great TotalCare P Optimum, which offers private hospital cover “at more sustainable premiums without claims-based pricing”. While the rider does not cover the S$3,500 deductible at private hospitals, the out-of-pocket expense for the policyholder is capped at S$6,500. It currently accounts for 90 per cent of private IP rider sales.
In terms of lifetime premium, the overall savings a policyholder could reap are significant with a lower-value rider. For GE’s private hospital plan plus rider, the total lifetime expense in premium, assuming the new rider, is around half of the outlay for the higher-value TotalCare P Signature rider.
