Posted on Nov 19, 2015 by Rob McBroom
Benjamin Franklin once said, "In this world nothing can be said to be certain, except death and taxes." Of course, the world has changed dramatically since Franklin's time and many things can now be added to this list, one of which is increasing health insurance premiums. Historically, almost every health insurance provider has increased their premiums on a yearly basis. Some increases are small, while others can be quite large, and will inevitably result in questions along the lines of, "Why are my premiums going up?".
To help answer this question, Pacific Prime has published an annual report on International Private Medical Insurance (IPMI) inflation. We are pleased to announce that our latest version of the report has been released and is available for free now.
About this year's IPMI report
This year, we decided to take a slightly different angle to our annual IPMI report and present it in two ways: via a new website and a downloadable PDF. While the presentation is different, we have retained the insurers, plans, countries, and regions used in the 2014 report (available here).
2015 was an interesting year in the IPMI industry, with a number of mergers and new plans implemented, not to mention an increase in premiums across the board. To help explain these drivers we have included a new metric this year which allows readers to compare IPMI inflation with Consumer Price Inflation. We have also provided an in-depth look into what we believe to be the main drivers behind inflation - more on those below.
Global IPMI inflation
In 2015, we found that on average IPMI plan premiums increased by 9.2%, which is up considerably from the 7.1% average in 2014. As you can see in the graph below, year-on-year premium increases had been decreasing up until 2015, when they increased. While interesting in its own right, when we compared IPMI inflation to Consumer Price Inflation (CPI) we found an intriguing trend: IPMI Inflation is almost always 5% higher than CPI.
IPMI inflation in China
When it comes to China, IPMI inflation was 9.5%, slightly higher than the global average. As you can see from the chart below, CPI has been largely stable in China, while IPMI inflation has been following closer to the global IPMI trend. This is interesting as it shows that while China has a large population with rapidly increasing purchasing power, this does not influence IPMI inflation.
Drivers behind IPMI Inflation
The fact that IPMI inflation tracks global CPI, yet not country-specific CPI, raised some interesting questions as to what then does impact IPMI inflation, and how can the consistent 5% difference be explained? While we do cover this in the report, we believe that there is one main answer to these two questions, and that is the cost of healthcare.
We fully believe that the main driver behind IPMI inflation is the increasing cost of healthcare. According to a report published by Aon Hewitt in early 2015, healthcare costs inflated by 10.15%, which runs close to IPMI inflation. Healthcare is increasingly costly in many countries, and you can see this reflected in IPMI premium movement.
In our report we identify four major drivers behind healthcare inflation that also have a direct impact on IPMI inflation:
New medical technology
An imbalance of healthcare resources
Rising salaries for healthcare professionals
Overuse of healthcare
We explain more about these in detail in the opening section of our report.
To view our report, please checkout our website where you can read it online or download a PDF version for reading and printing. And as always, please feel free to contact us if you have questions about your premiums and inflation.