Australian private health insurers are making huge profits during the COVID-19 pandemic and lockdowns, becoming a major contributor to increased costs of living.
Australia’s health insurers have seen sharp profit bumps amid outbreaks of the COVID-19 Delta variant in Victoria and New South Wales which have resulted in extended lockdowns.
A recent report showed the health industry’s net profits after tax increased 93.7 per cent from the previous year.
The report was conducted by Standard and Poors Global which extrapolated data from the Australian Prudential Regulation Authority (APRA) to publish its findings.
The profit bumps are largely attributable to a lack of access to healthcare during lockdowns in Victoria and New South Wales, resulting in policyholders deferring rather than forgoing treatments.
On 25 August, Medibank Private posted a 40 per cent jump in full-year net profit as a heightened focus on health during the COVID-19 pandemic boosted demand for its health insurance policies. Australia's biggest health insurer reported net profit of $441.2 million for the year to June 30. Health premium revenue rose 2.1 per cent to $6.69 billion as the company signed up 82,500 new members across its Medibank and ahm brands, pushing up its market share by 37 basis points.
Chief executive David Koczkar said:
"More people continue to prioritise their health and wellbeing and see greater value in private health, given the uncertainty around COVID and heightened pressure on the public system."
That helped the health insurer grow more in the last 12 months than it had over the past 10 years, Mr Koczkar said.
Despite the profit bumps, the federal Department of Health, the Australian Prudential Regulatory Agency (APRA), the Private Health Insurance Ombudsman (PHIO) and the Australian Competition and Consumer Commission (ACCC) say they are monitoring the sector after its commitment to not yield extortionate profits during a time of crisis for 60 per cent of the country.
In late July the Australian Bureau of Statistics indicated that Australian consumers' most significant price rises in the June quarter were automotive fuel (+6.5 per cent) and medical and hospital services (+2.4 per cent) due to the annual increase in private health insurance premiums.
In a response to enquiries made by Flownews24, a federal Health Department spokesperson issued the following statement:
“Both the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have issued information that provides guidance on the financial treatment by private health insurers for these deferred treatments. This guidance is intended to protect the interests of policy holders by making sure insurers are able to fund all future claims, including those which have been disrupted due to the COVID-19 pandemic.”
The response obtained by Flownews24 also stipulates that "private health insurers have and continue to deliver a range of initiatives in order to aid policyholders currently affected by the pandemic."
These initiatives are said to include extensions of all products to cover all COVID-19 related claims, returning excess premiums to policyholders and waiving premiums for policyholders enduring financial hardships.
According to S&P, the extension of lockdowns will result in an increase of deferred payments that will be permanently lost. Duffie Osental of Insurance Business Australia wrote:
"A portion of the deferred claims will likely be permanently lost due to the ongoing lockdowns and limitations on service providers to provide extra services to catch up on claims. We believe that as lockdowns are extended, the percentage of deferred claims that will be permanently lost will increase.”