Demographic trends challenge IP insurers’ sustainability

[SINGAPORE] All seven insurers that offer Integrated Shield Plans (IPs) have just rolled out new-design riders. In line with the Ministry of Health’s requirements, the riders no longer cover the deductible portion of the hospital bill, and the co-payment cap rises from S$3,000 to S$6,000.

The new riders are on average around 30 per cent cheaper than older riders, and savings could be even more substantial depending on the insurer.

For policyholders, the trade-off is higher out-of-pocket expenses. Making policyholders pay a larger share of a hospital bill is expected to curb overconsumption of healthcare.

How far will the new riders go to change policyholder behaviour? Will they help to shore up IP insurers’ profitability? Some insurers have incurred underwriting losses for around two to three years running, with a brief respite in the Covid years when people postponed treatments.

This year, five insurers are raising premiums of their base plans. Some have hiked rates for two or three years in a row. There seems to be little respite for policyholders. The premium increases dilute the savings from the new riders.

It is, of course, too early to ascertain how many will switch to the new riders. About 71 per cent of Singapore residents (around three million people) hold IPs. Of these, about two-thirds or two million people subscribe to riders.

Most are likely to have purchased their riders prior to November 2025. For them, insurers may take differing approaches to encourage a transition.

In the end, the older riders are likely to suffer even steeper premiums. Affordability may well force a switch.

The backdrop to all this is the sobering forecast by WTW that medical cost inflation for 2026 is set to rise by 16.9 per cent, far higher than any other forecast so far.

Until now, raising premiums are a relatively quick fix for insurers grappling with losses and rising claims. Other levers, such as specialist panels and claims-based pricing, have likely helped – but not by much.

Yet, policyholder behaviour is only one aspect of runaway claims. Arguably, the more inexorable trend – along with more advanced detection and therapies – is an ageing population which will suffer more chronic diseases and need healthcare.

In any case, it seems that behaviour is already shifting. Between 2020 and 2022, seven in 10 hospitalisations were in Class B2/C wards, according to the Central Provident Fund. Of those with costly private hospital plans, about a third opted for public hospitals in B2/C wards. Of those with Class A plans, 73 per cent stayed in B2/C wards. These people clearly chose not to overconsume.

Interestingly, some insurers specify partner hospitals in their specialist panels, cutting out more costly ones such as Mount Elizabeth and Gleneagles Hospital. This is a welcome addition to the range of rider choices, as they may be more affordable than those that allow you to choose any private hospital.

Ultimately, however, the industry may need to confront the all-important question of whether Singapore’s resident population – estimated at 4.2 million as at June 2025 – can support as many as seven IP insurers.

As birth rates continue to fall, Singapore is expected to reach “super-aged” status this year, where the proportion of those age 65 or older rises to around 21 per cent.

The demographic trends do not bode well for IP insurers’ risk pools. Consolidation may well be the most rational way forward for the IP market’s long-term sustainability.