3 major reasons health insurance premiums increase every year

點解醫療保險保費每年升?

Countless people are rightfully concerned about the neverending climb of the health insurance premium rate. How come it increases year-on-year? Are insurers just hell-bent on making more profit? What if somewhere in every health insurance policy hides a debilitating term and condition for policyholders? These are just a few of the pressing questions when it comes to health insurance inflation. As the government rolls out the Voluntary Health Insurance Scheme (VHIS), the general public's health knowledge increases. More and more people are willing to spend money on securing a health insurance plan

Today at Kwiksure, we'll take a quick glance at 3 major reasons why premiums inflate. 

Premiums increased by 86% over the span of 10 years 

As seen in the 2018 Health insurance for individuals in Hong Kong report, the average premium rate for an individual health plan shot through the roof. From 2006's HKD $2,345 to 2016's HKD $4,365, it has increased by a stunning 86%! 

Using the past two years as an example, let's compare the premium rates for the following groups: a 35 and 37-year-old, a 45 and 47-year-old, and a 55 and 57-year-old. These are all non-smoking men who have started their plans with different insurers in the same period - September of 2017 to September of 2019. Here, you'll notice the following inflation:

Age

Rate of premium inflation

35 and 37-year-old males

4.1% to 17.8%

45 and 47-year-old males

4.8% to 23.4%

55 and 57-year-old males

5.2% to 20.9%


As you can tell, every year - even in the youngest age group - the premium rate can increase by a minimum of 4.1%! This shows that premium inflation is the trend, and not because of specific insurance companies. So, what are the causes behind this trend?

1. Age and sex

The older you are, the higher your risk of developing a wide spectrum of severe illnesses. This leads to an increase in the overall claim amount and premiums. 

Also, numerous medical plans refuse to provide cover for people with "pre-existing and known conditions". Let's say there is a bone spur in your left knee and you're aware of this before you purchase insurance. In this case, your insurer won't compensate you for any related conditions, diagnosis, and treatment of your bone spur. Thus, don't wait until you're old before you secure health insurance. Your aging body will be ill, so your insurance company may not be willing to accept your health insurance application.

To ensure fairness, insurers tend to group insurance premiums based on age and gender. Certain demographics have a higher chance of claiming compensation. Babies, adult women, and elderly men are considered as "higher-risk groups". Naturally, the premiums will also be more expensive. Why are adult women at a higher risk, you ask? In their thirties, women are more prone to developing gynecological diseases. These include but are not limited to vaginal diseases, uterine diseases, and ovarian problems.

2. Medical inflation 

Medical inflation has numerous causes. For instance, an increase in inpatient room fees, doctor's fees, and drug factory markups. Using new medical equipment will also up the medical expenses drastically. According to Willis Tower Watson's 2019 Medical Trends Around the World report, in 2018, globally healthcare costs increased an average of 9.7%. This is far more than Hong Kong's standard inflation of 2.6%.

To add to that, private hospitals in Hong Kong are getting increasingly pricey. This is due to the imbalance of the public and private medical systems in Hong Kong and the influx of new patients from the mainland seeking treatments. Since healthcare costs go up every year without fail, insurers can only increase their premium rate in response.

3. Claim policy

Is your insurance company's claim policy too relaxed? Then, more people will file for claims. In that case, it'll push the operating cost up higher. Insurers can only increase next year's premium rate as a way to break even. 

Consider your ability to protect yourself from future losses

Planning to secure a health insurance plan? Aside from paying attention to the premium rate right now, you should also consider your ability to hedge against future losses. Also, when increasing the price, some insurers will consider raising the coverage rate as well. Lastly, pay attention to whether the coverage rate provides you with better coverage or if it's just small bonuses.

Learn more practical insurance knowledge

Besides VHIS, Kwiksure provides car insurance (third-party and comprehensive), Contact our team of expert insurance advisors now. They will be more than happy to help you find the perfect insurance solution.