Over the past years, COVID-19 has presented challenges to every industry globally. There’s been short-term impacts to individuals and businesses, and we are still yet to see and fully understand what the long-term effect of the pandemic will be.
The private health insurance (PHI) industry has faced both challenges and opportunities, requiring us to think creatively about how to support members. Despite the challenges, premium revenue grew 3.2%, claims growth remained flat and net margins increased to 5% in the year ending 30 June 20211.
So, what are the impacts of COVID-19 to PHI? Short-term? Health systems and emergency rooms have been inundated globally with hospitalisations, resulting in elective surgeries on hold. Many Extras providers, such as optical and physiotherapy offices, have also been closed due to lockdowns.
Both the public health system and private health insurers pivoted their operating and customer service models as a response. General medical practices shifted from face-to-face appointments to telehealth consults as an alternative measure of health care. Private health insurers also reacted to the limiting of their ancillary providers to support their customers through lockdowns, through initiatives such as ‘refunds’ or premium delays. For example, AIA Health introduced Extras Value Protect, a product feature that refunds a percentage of unused extras premiums paid through the year, minus any claims paid.
The long-term effects we are yet to see but are inevitable. There has been less focus on early diagnosis and preventative health, such as cancer screenings. Mental health and wellbeing has suffered with the impacts of physical isolation and lockdowns impacting almost everyone. Between 16 March 2020 and 25 April 2021, over 15 million Medicare Benefits Schedule (MBS) subsidised mental health-related services were processed, and Australian personal crisis Lifeline received close to 82,000 calls2. COVID-19 has the potential to contribute to or exacerbate long-term mental illness including anxiety, depression, PTSD and substance misuse. Both health and life insurers will see the impact of increased claims because of both these short and long-term effects for many years to come.
The main opportunity for PHI is the area of preventative health. The public health system is focused on treating the immediate effects of the pandemic while health insurers need to focus on helping their customers be as healthy as possible to remove the need for medical intervention later.
In 2018, AIA began talking about four numbers that embodied the state of Australia’s health and wellbeing: 4490. This health insight represented four modifiable behaviour factors (or simply put, four lifestyle choices) – physical inactivity, poor nutrition, smoking and excess alcohol consumption – which lead to four non-communicable diseases (NCDs) – cancer, diabetes, respiratory and heart diseases – that caused 90 per cent of Australian deaths. This has now been updated to 5590, with the inclusion of interaction with the environment leading to mental health conditions and disorders. Mental health conditions may present alongside, and interact with, other NCDs. For example, evidence suggests that depression is a significant factor in the development of heart disease3. Personalised health and wellbeing programs offered as part of health insurance products, such as AIA Vitality, work to reward their customers for engaging with their health and taking proactive steps to improve it.
Overall, the impacts of the pandemic will be felt for decades to come. The opportunity for private health insurance is in the ability to react and adapt quickly to the ever-changing customer needs and continue to provide essential support in preventative health. Something that AIA Health with AIA Vitality is truly committed to.