More insurers to launch claims-based pricing for Integrated Shield riders
Singapore
MORE insurers are launching claims-based pricing for Integrated Shield (IP) riders, in an effort to shore up their underwriting results and eventually dampen future premium hikes.
Claims-based pricing is similar to the practice of no-claim discounts in motor insurance, where motorists enjoy a discount on their car insurance renewal as long as they do not make claims.
In the context of IPs, claims-based pricing is being applied mostly to riders for private hospital plans. Premiums of base IP plans are not affected.
Those who do not make a claim will enjoy a discount off their "standard'' rider premiums of between 20 and 25 per cent, depending on the insurer. Those who do make a claim of at least S$1,000 or S$2,000 are likely to find that they have to pay more in rider premium in the subsequent year.
The premium increase is up to two or three times the standard premium. The quantum of the increase may depend on the bill size and whether the claim is made at a non-panel hospital.
Older policyholders - the threshold varies between age 55 and 65 - are subject to fewer escalation levels and a significantly lower premium hike. GE, for instance, has capped the premium increase for those age 65 and older at 25 per cent.
Prudential was the first to launch claims-based pricing in 2017, and has since staged a substantial turnaround in its IP underwriting results. Great Eastern and AIA will launch claims-based pricing in April. Aviva has indicated plans to launch this in 2022.
In 2018, Prudential reported an underwriting profit of S$42.7 million after losses in 2016 and 2017. In 2019, its underwriting profit rose 21 per cent to nearly S$52 million. Income's IP portfolio was also in the black in 2019, but out of seven insurers with IP plans, five were in the red.
Insurers are asking policyholders who bought their IP riders before 2018 to transition to co-pay riders, where they have to co-pay 5 per cent of the hospital bill, subject to an annual cap of S$3,000. It is hoped that co-payment would encourage the prudent use of healthcare services.
READ MORE: Is claims-based pricing for Shield riders a double-edged sword?
