Such a failure in terms of a lack of claims-sharing also means that health insurance lags behind other classes of commercial insurance business. Colleagues from other markets often shake their heads and whistle softly when they see what passes for normal practice in our discipline. Not important, you might think, so long as health insurance is efficient and works to the best advantage of its customers. But clearly it does not.
Insurers are unable to deploy their full range of skills and experience to price a typical risk. Claims are an underwriting factor that is naturally taken into account at renewal, so an insurer quoting on a piece of new business should be in possession of the same information. If not, the scheme could be over or under-priced. Either way, this is unfair as a policyholder could either be paying too much from inception or expect an uncomfortable hike in premiums at renewal. Thus the lack of claims sharing has the potential to destabilise market pricing.
Furthermore, such inefficiency is exacerbated by the health insurance sector’s lack of ecommerce activity. Attempts to introduce a market-wide ecommerce platform are stymied by the reluctance of certain insurers to provide the raw material it requires to operate – claims information. The imarket/Polaris initiative and the Healthcode quotation portal have each come across the same problem.
If we had a viable and widely-used ecommerce facility, we could increase basic efficiency (bringing it to a par with other classes) and we could begin to get costs under greater control. This would feed through to the quality of terms offered to policyholders and it would enable insurers and brokers to grow as profitable businesses.
There is no technological barrier to ecommerce in health insurance – it is proven in other classes, where the benefits are many and varied for all concerned. It is purely a matter of will on the part of certain providers who fear for their commercial wellbeing.
One of the arguments such firms have used in defence of not releasing claims information is that SME business in particular is “community rated”, with claims histories having little impact on underwriting calculations. But the clear evidence proves that the market does now differentially price SME business, making a policyholder’s claims record a direct and weighty influence on their premium.
This makes it even more of a TCF issue if this information is withheld by the holding carrier.
So we have to ask: just what are those who oppose the release of claims information so worried about, and what are they trying to hide by refusing to release this information? Some argue that building a book of business takes time, effort and expense, and that this work would be undermined by the release of confidential data. But that implies that they are afraid of going toe-to-toe with market rivals. Why? Do they know they are charging more than a competitor would charge?
If 2008 has been the year when claims sharing has become a dominant issue in health insurance circles, 2009 may be the year when genuine progress is made in tackling it. Leading figures will meet in January to discuss the issue. We should resolve now to make the New Year one of regulatory compliance and constructive competition.