(The 2013 Annual International Insurance Review is available here)
In this article we will first present our findings of the premium increases and premium inflation rates in each region and country we studied, with specific insurance findings to be presented at the end. Overall our findings were that International Private Medical Insurance (iPMI) premium inflation was very high, at roughly 10.8 percent per year over a 5 year average. While variations exist between countries, the reality is that iPMI inflation rates were extremely consistent throughout the world. However, it is important to note that this is medical insurance premium inflation at the high end of the sector, and not necessarily with regards to the mass market. Even presenting the argument that premium increases are fairly consistent on a global basis, there are some immediate outliers - Hong Kong, for example, runs at an iPMI premium inflation rate of roughly 13 percent per year, while Kenya's premium inflation rate is approximately 9 percent per year. Although there is a difference in premium inflation rates between Hong Kong and Kenya, the difference is not overly substantial - as will be seen inside this report. Globalsurance is pleased to reveal the results of our latest study on the international health insurance industry and rates of international medical insurance inflation around the world as of August 1st 2012. Using 7,916 data points from 8 different International Private Medical Insurance providers in 10 different countries, Globalsurance has been able to successfully identify a number of trends within Global Medical Inflation for individual International Private Medical Insurance (iPMI) plans during the time period from 2008 to 2012. iPMI is a subsector of the greater health insurance industry which services the global population of expatriates and international High Net-Worth individuals. The companies sampled in the studies use Age and Geographical Area of Coverage as the main variables in their premium calculations. By selecting a sample which is community rated Globalsurance has been able to efficiently identify the actual rates for premium increases in different parts of the world. Our measure of inflation is based on a sample of policies, ages, and published rates for each insurer included in the study. Globalsurance selected the most common age groups and most common policy types for our data points to achieve realistic measurements in relation to medical insurance premium inflation around the world. While individual insurance providers and underwriters may disagree with our findings, the figures represented in this report are based on our sample and present baseline figures for all of the regions and companies we chose to consider. It is important to note that, unlike the recent Towers Watson Report on Medical Trends, the data contained in the Globalsurance insurance review is not survey based. Rather than looking at individual responses and feelings in reference to levels of health insurance premium inflation, which may have some inherent bias dependent on the respondent, Globalsurance is analyzing the actual premium data from insurance companies with exposure to the world at large, over locally based providers operating in a single country. Additionally, we have analyzed premium data, and not healthcare pricing data. Consequently the figures represented in this report are indicative of the levels of healthcare cost inflation which insurance perceive to be in place in the locations we sampled; profit and operating costs of the individual insurers are assumed to be unchanged. While the increase or decrease in premium values may point to actual rates of medical inflation in the countries which were included in the study they do, in fact, represent the increased costs placed on policyholders. However, it should be noted that, while the figures contained in this report are the actual rates of iPMI premium increases for the duration of the study, the removal of Age and Policy type means that the figures presented in this study of International Medical Insurance premium inflation can be used as a suitable proxy for rates of actual medical inflation in relation to healthcare costs around the world. It should be noted that the proxy does not represent medical inflation across the entire healthcare sector within a country or region; for example, NHS cost increases in the United Kingdom are not evident in our findings. The rates of iPMI premium inflation are only a proxy for healthcare costs in High-End, private medical facilities in the countries which we considered, due to the basic nature of the international medical insurance products we are studying. So, without any further ado, here is the Globalsurance International Insurance Review:
South East Asia
The first region which we looked at was South East Asia, including the countries of Singapore China, Thailand, Indonesia and the Philippines, in addition to the city of Hong Kong. Healthcare in the South East Asian Region has been getting more expensive since 2008, with Hong Kong representing a locality with one of the largest annual premium rises in the word. Taking these factors into consideration we elected to study health insurance premium increases in Asia as the first part of our research, to some startling results. Overall, health insurance premiums are growing at a faster rate in Asia year-on-year than in any other region on earth. The total average increase in medical insurance premiums in South East Asia from 2008 - 2012 is a relatively high 11.1 percent. However, the top line average is not entirely indicative of the rates of health insurance inflation in the region due to a number of lower cost countries included in the study sample. To get an idea of what the actual rates of premium inflation for health insurance products in South East Asia were we analyzed the individual countries identified as study subjects and came across the following increase data:
Above we have listed the increase percentages for premium values over the previous year. For example, in 2008 Hong Kong Health Insurance premiums where 13.4 percent higher than in 2007, while China experienced an 18.8% increase in the cost of premiums that same year. Interestingly, whilst Hong Kong, China, and Singapore all trended down in 2010, Hong Kong still had premium increases of around 13 percent - far outpacing the other locations. As can be seen in the above, health insurance premiums in Hong Kong are increasing at a faster rate than the premiums of individuals living in the other four locations, pointing to the heightened expense of receiving private medical treatment in Hong Kong. 1) Hong KongAs Hong Kong represents the largest premium increases in the South East Asian Region, we elected to further study individual company movement in the city in order to compare that movement across the other Asian locations we studied. Hong Kong possesses a first class private healthcare system, and has a large expatriate population which creates the demand for high class medical services at superior private hospitals. The mix between supply and demand may have had an impact in the rates of iPMI premium inflation within the city, the full scope of which can be seen in the below table.
Of the international medical insurance companies for which we have Hong Kong pricing data from 2008, AETNA had the highest average annual increase at 14.9 percent. Of these companies, AETNA is also notable for having the largest premium increase in a single year at 23.4 percent in 2008.
As can be seen from the table above, there is lots of volatility in the pricing on iPMI plans in the Hong Kong Market - particularly with a company like AXA PPP which raised premiums in 2010 by 44.1 percent over their 2009 prices (the first year for which Globalsurance has data on the company); AXA's premium inflation rate then dropped to 0.6 percent in 2011 - a drastic revision in the company's pricing structure. Overall, Hong Kong's premium inflation rates vary wildly between companies like Allianz, at a comparatively low 8.1 percent per year inflation rate, and Aetna at 14.9 percent per year. 2) China In China, with an average annual health insurance premium increase of 12.6 percent, we are presented with a very similar scene to Hong Kong. While premium increases in China are slightly lower than in Hong Kong, they are above the regional average. Insurance company premium increases by year in China are: Again, AETNA leads all the providers with an average increase of 14.8 percent per year. The company increased premiums in the PRC by 23 percent in 2008, only 0.4 percent behind the increases it levied on policyholders in Hong Kong. However, with the exception of 2008, AETNA's premium increases in China exactly mirror those in Hong Kong, strongly suggesting that despite the historic tendency to view the Chinese healthcare market as relatively low quality, there are emerging high cost/quality options in the country which are necessitating higher premiums to offset the increasing risk. Without the 2008 23 percent increase from AETNA, the average premium increases for the company come in at 12.75 percent; this is still higher than the 12.6 percent country average, but is more consistent in relation to levels of medical inflation in the PRC. This view is strongly correlated by the data from IHI-BUPA (formerly IHI-Danmark), which also mirrored its Hong Kong premium Increases in China for a 13 percent average. Of the companies operating in China it is AXA PPP, in a reverse of the Hong Kong landscape, which has had the lowest premium increases at 6.8 percent annually. Whilst this may be an indication that AXA PPP does not yet have sufficient experience in the Chinese health insurance market to increase its premiums in line with the other providers, it does cause the question to be raised as to whether AXA PPP policy premiums are sustainable in China over the long term if their loss ratios grow to an unmanageable extent due to their non-rising prices. 3) Singapore Singapore was another location we looked at in Asia. The Singaporean health insurance premium inflation situation is extremely similar to those in Hong Kong and China. Total medical insurance premium inflation in Singapore for the insurance providers covered in the study is: AETNA and IHI both remain relatively stable, albeit high, across Hong Kong, China and Singapore at around 14. 8 percent and 13 percent, respectively. However, with an average total increase of 12 percent Singapore lags the inflation rates of Hong Kong and China, which can be seen in the lowered increases of the remaining insurers. InterGlobal, for example, which was running at 12.5 percent inflation in both China and Hong Kong has an average yearly increase of only 11 percent in Singapore. Additionally Allianz, BUPA, William Russell, and AXA PPP all came in at lower rates of inflation than the country average. DKV Globality is the exception to the trend, and is actually seeing premium increases closer to those of AETNA than the Singaporean inflation average. This may be, in part, due to the company initially under pricing their products and having to rectify the loss ratio which has evidently been experienced since 2010. As DKV comes to a further understanding of the Singaporean healthcare market Globalsurance would expect to see lower rates of increases in the coming years. 4) Indonesia Indonesia has the 4th highest rate of medical insurance premium inflation in Asia at an average yearly rate of 10.2 percent.
The costs of rising healthcare in Indonesia are surprisingly large, and Globalsurance did not predict the premium increases which we have discovered. An explanation for the rapid rise in health insurance premiums in Indonesia may be, in part, due to the influence of Singapore on the country.
The Singaporean effect on the Indonesian healthcare market is a known quantity; a high volume of Singaporeans routinely travel to Indonesia for their medical treatment due to the (generally) lowered costs of healthcare in the country. However, this movement has pushed up the cost of healthcare within Indonesia, and this has had a knock-on effect in the increases for health insurance premiums throughout the country. Furthermore, the Indonesian Island of Bali has extraordinarily high costs associated with local healthcare services - primarily due to a limited number of providers and the island's distance from other parts of the country. Indonesian iPMI plans will cover Bali, which is an outlier for the entire country's healthcare pricing, further pushing up premiums. On the company front, following a trend being seen across Asia, both IHI and InterGlobal represent the providers with the highest levels of inflation at 13 and 11 percent respectively; the lowest rate of premium inflation, at 6.8 percent belongs to AXA PPP which has never had a single year increase greater than 10 percent in the country. 5) Thailand Thailand, at 9.8 percent average annual premium inflation, Thailand is home to some of the best medical facilities in Asia, including Bumrungrad Hospital in Bangkok, yet does not have quite the same levels of premium inflation as more developed economies like Hong Kong, Singapore, or even Indonesia. However, this is not to say that medical insurance costs (and consequently healthcare costs) in Thailand are not increasing, as there is definitely a noticeable rise in premium values in Thailand; however, these are lagging behind the rest of Asia. Notable in Thailand is Allianz, widely considered amongst the best providers in the world, which only has an average 6.3 percent per year increase in premiums. This is a strong indication that Allianz has stronger premium management in Thailand than any of the other iPMI companies operating in the country, which have levied premium increases which are, for the most part, outpacing the Allianz inflation rates by a wide margin. While Thailand has been relatively protected from the economic turmoil experienced by large parts of the world over the last 5 years, it can immediately be seen through the low medical insurance premium increases that healthcare services in the country are not yet overly expensive. This can explain why residents of many other Asian nations routinely choose to travel to Thailand for general health checkups and high-cost surgical treatments as the country is able to offer high quality services for a relatively small cost. 6) The Philippines The last country we looked at in Asia was the Philippines, which had the lowest average annual premium increases in the region at 9.4 percent per year.
As in Thailand, an Allianz policy in the Philippines represents fairly good value at well under the average inflation rate with only 6.3 percent inflation on the premium each year.
However, as can be immediately noticed from the above, it is AXA PPP with an average 0 percent increase which could be the most sensible coverage option in the country; although the fact that the inflation rate averages out to 0 percent on AXA PPP Philippines is largely due to a -12.9 percent reduction in premium values in 2011, strongly pointing to a severe over-estimation of healthcare costs in the country. However, while there are slowdowns being seen in most global economies, and especially the BRIC nations of Brazil, Russia, India, and China, the Filipino economy is currently beating expectations and grew at roughly 6.4 percent in the first quarter of 2012. This is far outpacing the International Monetary Fund's (IMF) forecast of 3.5 percent for the year. This leads Globalsurance to believe that healthcare costs, and consequently health insurance premiums in the Philippines are set for a sharp upwards adjustment over the short term future.
In the Middle East we looked at Dubai as a reasonable sample of the region's activity. Globalsurance selected Dubai due to the emirates high net-worth population, high uptake of health insurance products, and large expatriate community in the city. The total Average rate of premium inflation in Dubai is 10.1 percent per year, this represents a lower inflation rate than that found in South East Asia, and strongly suggests that the cost of medical care in the Middle East is far lower than the cost of care in Hong Kong, China, or Singapore. 1) Dubai As mentioned above, Dubai has a lowered rate of health insurance premium inflation from South East Asia. Rates of premium inflation by company are:
It should be noted that while the lower 10.1 percent rate for the Middle East may suggest that the region has lower costs associated with medical care, the truth is that there were under-average increases in 2010 where the average rate of premium increase was a relatively minor 6.9 percent in that year.
The major factor contributing to the lowered level of inflation in 2010 was the Global Financial Crisis (GFC) of 2008, which impacted MENA and Dubai severely. Further discussion of the impact of the Global Financial Crisis can be found later in this article. Interestingly, in all South East Asian Locations and in the Middle East, IHI remains fairly stable at an average annual increase rate of 13 percent. Even with outside factors, such as the GFC, IHI has levied roughly the same increases in all parts of the world. This may be largely in part due to the fact that IHI provides "worldwide" coverage under their products, and that all premium increases from the company represent the total global rise in healthcare costs. However, a similar story can be found with DKV Globality, which has also had the same average increases in Asia and the Middle East at 14.3 percent. Again, this is higher than the average trend, but is possibly indicative of the company's relative "newness" to the global insurance market. AETNA in Dubai, unlike South East Asia, was not the leader in premium inflation with increases coming in under the regional average at 9.8 percent. Additionally, William Russell also has lower increases in the Middle East (8.5 percent) vs South East Asia (10.9 percent), with BUPA WHO only seeing fluctuation of 0.1 percent between both these regions.
Rest of The World
Calculating the figures for the "rest of the world" we have identified the United Kingdom, Brazil and Kenya as our samples. We elected to exclude the USA because of extreme inflation rates running ahead of all other localities, and because the impact of proposed health insurance regulations under the Affordable Care Act (ObamaCare) are not yet fully understood. For this section of our report the phrase "Rest of the World" should be understood as specifically excluding America. 1) United Kingdom The United Kingdom, having an established private healthcare market in addition to offering public medical services, being the home of a number of leading international medical insurance providers, was an obvious choice to study with reference to medical insurance premium inflation on a global basis.
The Average Annual Premium increase from health insurance providers in Britain is roughly 10.8 percent per year.
Again, IHI remains firm at an overall average inflation rate of 13 percent, with AETNA continuing to also represent a relatively high cost option at 11.5 percent inflation in the UK. InterGlobal, however, bucks its double digit increases in Asia and the Middle East with a lower than average year-on-year increase of 9.9 percent. Allianz (Allianz Worldwide Care) is notable due to its 9.0 percent average yearly increase, which is actually higher than the inflation rates the company levied on policyholders in Hong Kong - a city which has a higher cost of care than the UK. DKV Globality has continued its stable global premium increases in the United Kingdom, and again has 14.3 percent inflation. 2) Brazil A cornerstone of the BRIC Nations (Brazil, Russia, India, and China), Brazil has a large amount of potential for health insurance underwriters - which is being seen in increased entries into the Brazilian insurance market over the last 3 years. As a country in South America, Brazil has historically not been renowned for its ability to provide exceptional medical services; however even without above-average healthcare provisions, as with all other countries around the world, medical inflation is inevitable:
At an annual average inflation rate of roughly 10.5 percent, Brazil lags the United Kingdom, Middle East, and Asia. Like the UK and Middle East, Brazil had no premium increases above 20 percent in a single year, with the highest yearly increase coming from IHI in 2008 at 19.6 percent.
3) Kenya Globalsurance opted to use Kenya as a proxy for our African Data due to the relative stability of the nation, and its relative wealth in comparison to the rest of the continent. Kenya, on average, experienced lowered rates of medical insurance premium inflation over most of the other countries and regions we studied; this was hypothesized by Globalsurance prior to commencing the investigation, due to the lower costs associated with healthcare services in Africa. Inflation rates of Medical Insurance premiums in Kenya are: While IHI and InterGlobal remain relatively high at 13 and 11 percent, respectively, the only other company with an excess of 10 percent premium inflation is new comer DKV Globality at 14.3 percent. Allianz, AETNA, BUPA, and AXA all have average yearly inflation rates of less than 10 percent for the duration of the study, despite AETNA's 12 percent increase in 2009.
We now move on to examining individual insurance companies and their rates of inflation for all the above mentioned locations in order to give you an easier understanding of the premium movement by provider.
AETNA, a long established and leading insurance provider in the USA, took over international insurer GoodHealth and has been operating in the global market for approximately 5 years now, giving Globalsurance the opportunity to look at a large cross section of products and regions to understand this company's health insurance premium inflation rates. Over all the countries and regions included in the study from 2008 to 2012, AETNA International health insurance premiums rose at an average rate of roughly 11.9 percent per year. However, as can be seen from the figures above, the increase in AETNA health insurance premiums would have been far lower had we not looked at South East Asia, where the company experienced an average yearly premium increase of approximately 12.9 percent. A large portion of this figure is due to the high cost increases the company placed on its policies for customers in Hong Kong, Singapore, and China during 2008 - each of these three locations experienced a premium inflation of 23 percent or higher for that year. The AETNA Inflation rates for Hong Kong, China, and Singapore are also outpacing the inflation rates for the rest of the Asia-Pacific region at an average 14.9 percent increase each year for each of these countries, much higher than the 10.9 percent experienced in Thailand, Singapore, and the Philippines.
IHI, also known as IHI-BUPA had the most consistent increases of all the insurance companies included in the Globalsurance review. This is because IHI has global pricing, treating all countries and regions as a single pricing area, which means that premium values from this insurer have natural consistency across all nations. IHI typically provides international health insurance plans which offer worldwide coverage, which explains the stable inflation rates for the company's policies in all parts of the world. Additionally, due to the "worldwide" nature of IHI policies, the company has exposure to a number of high cost regions, including the USA and Asia. Due to Asia's heightened rates of medical inflation over the rest of the world, as of 2012, IHI's steady 13 percent-average increases* in premium prices are reflective of 1) increased risk of higher medical costs in Asian countries 2) actual rates of medical inflation on a global basis. *Even with IHI-BUPA premiums being calculated on a global basis, most of the risk population for the company's IHHP policy (the IHI-BUPA product we chose to study) is based in Asia, specifically Hong Kong. However, if we only included IHI in Asia, but excluded the company elsewhere (due to the nature of the provider's client risk profile) this would have exaggerated the difference between Hong Kong and the rest of the world.
As with the other insurance companies included in this study, and the individual countries sampled, there was a stark downward trend in terms of premium inflation in 2010 with only a 9.2 percent increase in the cost of IHI policies.
While this rose to 10 percent in 2011 there was a decrease in the inflation rate again in 2012, at 9.7 percent, and indicates that IHI is still feeling the effect of the Global Financial Crisis which started in 2008 - the year the company levied its highest premium rises for the duration of the study period. Although IHI's 5 year pricing average is above the premium inflation trends being seen by the rest of the industry, it is important to note that the company's last three years have all seen IHI-BUPA price premiums below the global premium inflation average which currently stands at roughly 10.8 percent per year.
The prices of an InterGlobal health insurance plan are getting more expensive, at a faster rate than those of any other companies included in this study, with the exception of IHI and DKV Globality. While the company has only increased its premiums by an average 10.9 percent over the last 5 years, it increased premiums in 2011 and 2012 by an average 12.8 and 12.3 percent respectively. From 2008 to 2010 InterGlobal has a relatively consistent premium inflation average across all countries, the above average total for the company comes with higher premiums being introduced in 2011 and 2012 as InterGlobal moved to individual country loadings for higher cost and higher risk areas. Again, Asia is the most expensive region when it comes to health insurance premium inflation, with Hong Kong and China outpacing any of the other locations included in the study for InterGlobal products at 12.5 percent per year.
The company had a higher rate of premium inflation in its "Orchid" Geographical areas, including Hong Kong, Singapore and China, at 10.9 percent than it did around the rest of the world (8.5 percent).
William Russell's biggest premium increase for the years which Globalsurance studied occurred in "Orchid" countries during 2009 at 19.6 percent, with the companies 2010 premiums increasing by 9.5 percent across the board. In a reversal of trends, premium increases for William Russell products in 2011 were higher throughout the rest of the world (14.7 percent) than they were in the Orchid countries - however the inflation rates in Hong Kong, China, and Singapore returned to form in 2012 at 8.6 percent; significantly higher than the average 3.5 percent seen in the rest of the world. Even with these increases, of all the insurers considered in this study, William Russell's premiums are getting more competitive against the market average as time goes on.
Allianz Worldwide Care, or simply Allianz, has the lowest average annual inflation rates for medical insurance out of all the companies for which we have the complete data set running from 2008 - 2012. Allianz plan premiums increased by an average 8 percent per year for all countries and territories since 2008. Allianz has moved in a slightly different direction from companies like AETNA, IHI, and even InterGlobal, in that Hong Kong, at 8.1 percent, experienced a much lower rate of premium inflation than both China and Singapore for the study period; both those locations saw inflation rates of 12.1 percent, and 9.2 percent respectively. However, it should be noted that China health insurance premiums grew by an enormous 34 percent in 2008, while Singapore saw a 23.2 percent increase in 2009. Both these figures are much higher than any single year increase for Allianz policies in Hong Kong, and are the primary reason for Singapore and China outpacing the rest of Asia in inflation terms under Allianz's plans. Interestingly, while Allianz levied premium increases in 2010 of around 0.2 percent for a majority of countries around the world, the company obviously saw increased risk in both Hong Kong and the United Kingdom during that year. Although the Hong Kong premium increase for 2010 was relatively minor at a mere 1.1 percent, the UK increase was significantly above the global average, at 6.2 percent. It should also be taken into consideration that medical insurance premium inflation rates run roughly two years behind the regular economy. Given that the Global Financial Crisis occurred in 2008, and that the company had a global premium increase of only 0.9 percent during that year, the figure of 6.2 percent inflation in the United Kingdom is unusual in light of the company's and the industry's trends for that year.
AXA PPP is the first company included in our study which does not have full data for the complete study period. With an average inflation rate of 7.5 percent per year, the company's actual rates of medical insurance premium inflation are as follows: While the average increase rate of 7.5 percent per year is relatively low, this does include a significantly high inflation rate of 44 percent in Hong Kong for 2010. While AXA PPP's Hong Kong Inflation rate dropped substantially to 0.6 percent in 2011, Hong Kong does represent the geographical area with the highest increases for AXA Policyholders at 18.2 percent per year - well over the premium inflation rates of 9.7 percent per year in Singapore, Brazil and Britain. Notable numbers inside AXA PPP's premium inflation rates include a -12.9 percent reduction in premium values in the Philippines in 2011, which saw a yearly average increase of 0.0 percent for Philippines health insurance plans from 2010 - 2012. AXA PPP also levied 16.4 percent increases in Singapore, Brazil and the United Kingdom in 2011 - the highest yearly increases under the company's product portfolio outside of the 2010 Hong Kong numbers. Outside of the Philippines and the country's 0 percent inflation average, low cost areas for healthcare under AXA PPP plans include both Kenya and Thailand, which each saw a relatively small 4.6 percent per year rise in premium values. AXA PPP has the most volatility between countries, which can be seen in the massive readjustment of premium costs which occurred in most countries in the study during 2011. This may be a strong indication that AXA PPP has not yet come to a thorough understanding of their loss ratio and may be, especially in the case of Hong Kong, significantly underpricing their products.
BUPA Worldwide Health Options
BUPA Worldwide Health Options in a new product line from internationally renowned insurer, BUPA. Globalsurance felt that including a BUPA product range in the study was important, due to the company's many years of history in providing health insurance services around the world, and often on a country-specific basis. BUPA Worldwide Health Options (BUPA WHO), like AXA PPP, only had limited data available due to the relative "newness" of this product line; however, the data gleaned from 2010 - 2012 points to some very interesting facts, and saw the company levy an average premium increase of approximately 10.3 percent per year in all of the countries studied. While BUPA WHO has many zones in relation to its products (each policy will provide a specific coverage area which will impact the policy premium), it can be seen from the above data that the inflation rates for the company are very consistent around the world. The Average Inflation rate for Asia under BUPA WHO policies was 10.6 percent per year from 2010 - 2012. However, while the premium inflation rates for the company's coverage options were relatively stable, the major outlier was Kenya in 2011 which saw a much lower inflation rate than the average at only 6.0 percent for the year - leaving Kenya with an 8.4 percent rate of health insurance premium inflation for the course of the study period. Overall though, BUPA WHO plans managed to achieve relative stability with the total average inflation rates, with most countries and locations increasing in much the same manner as each other.
DKV Globality was included in the study, despite being a company for which only two years worth of data was available, due to the fact that their plan's premiums are very attractive given the coverage benefits being offered. However, as can be seen from the above, DKV had an average premium increase of 14.3 percent from 2011 - 2012, far outpacing all other insurance providers which Globalsurance looked at. While the company's premium rates increased in exactly the same manner in all of the countries studied, the question must be asked if the DKV inflation rate of 14.3 percent per year is actually sustainable over a long term period given the movement and adjustments of all the other providers operating in these areas. Additionally, the 14.3 percent average premium inflation rates under a DKV policy may indicate that the plans being offered by the company are simply too good at the current costs - making the DKV loss ratio unsustainable over the long term. For example, across all the insurance companies included in our study for all years, Kenya had an average premium inflation rate of only 9.6 percent; DKV, however, has increased the premiums of Kenyan policyholders in exactly the same manner as the premiums for policyholder in Hong Kong, at an average 14.3 percent per year - much higher than the industry trends. DKV is seeing high claims relative to premiums paid which says that Medical Inflation is high and the DKV has not yet identified a successful pricing point; Globalsurance is concerned about the viability of this company's offerings should the current premium inflation rates continue down the road.
Additional Findings and Supporting Data
The Regional Inflation rates for all of the regions and insurance providers mentioned above are 11.1 percent per year for South East Asia, 10.1 percent per year for the Middle East, and 10.3 percent per year for the Rest of the World.
The Global average for medical insurance premium inflation from 2008 - 2012 is an estimated 10.5 percent per year based on the Globalsurance study's findings.
This would be higher were it not for a global slowdown in premium inflation during 2010 as health insurance providers adjusted their rates in response to the Global Financial Crisis - 2010 average inflation stood at 7.4 percent for all countries, territories, and insurers included in the study. As can be seen from the above, Asian insurance premium increases are far outpacing any other region, even though inflation rates in the Middle East were higher than those in Asia for 2012 at 10.4 percent and 10.3 percent, respectively. In a regional breakdown, mirroring the data provided above, we can see the relative increases by year for each of the following regions, followed by an overall breakdown by country: 1) Asia
2) Middle East
3) Rest of the World
4) Global By Country
International Private Medical Insurance (iPMI) premiums are increasing at more than 10 percent per year, over a 5 year average, around the world. It is important to note that this is premium inflation at the high end of the medical insurance sector and does not necessarily reflect an increase in mass-market healthcare costs. iPMI premium inflation is high, although the difference between individual countries and the whole of the world is small while it exists. In fact, it is only on a worldwide basis where the premium inflation can truly be seen to eclipse the rates of medical inflation (healthcare cost increases) on a global basis. Globalsurance assumes that the profits and operating costs of the individual insurers are more stable than these companies' claims costs, and that consequently the primary driver for the global iPMI premium increases we have seen are due to the claims being experienced by the providers included in our study. With Profits and Operating costs stabilized at their existing levels then the rates of premium increases being seen are a good indicator for medical costs, and consequently medical inflation, throughout the study. The increases evident in iPMI premium values may come from two core areas. Firstly, it should be asked, especially in Asia, whether the increase of High Net Worth individuals and expatriates in the region is contributing to higher health insurance costs - are these individuals tying up healthcare resources while increasing demand at some of Asia's premier medical facilities, and is this actually contributing to a higher cost of healthcare in those markets which is having a knock-on effect on premium values? Essentially, as it takes many years to build high-class medical facilities and train doctors, and as the uptake of iPMI products is far outpacing the production of these facilities, demand for these services is rising faster than supply can be introduced. This may be a key point which is causing an increase in healthcare costs and which in turn may be causing the higher premium inflation rates within the iPMI sector. The second question which should be asked is whether iPMI itself is actually providing the impetus for increased medical costs throughout the world by driving medical inflation, forcing insurers to react by raising pricing points for their coverage products? In this case, the growth of International Private Medical Insurance around the world may, in fact, be driving medical inflation. If there was a supply and demand concern, then it would follow that each country and each region which Globalsurance looked at would have drastically different increases for their respective premium values. However, the increases are, for the most part, extremely homogenous - premium values, by and large, are increasing at roughly the same rate across all regions around the world. As various policies have covered larger amounts of the global High Net Worth and expatriate populations over the last 5 - 10 years the increases in the premium values of these policies have increased to a much higher rate than general healthcare inflation. This suggests that doctors are actually pricing their services to iPMI policy holders at a much higher point than for any other segment of the market. Because of this, Globalsurance is of the opinion that iPMI products are actually driving medical inflation rates around the world. The extreme growth in the iPMI market over the last 5 years, especially with an abundance of "full coverage" products in place within the market, may indeed be creating higher rates of inflation within the high end private medical sector. With full coverage policies, iPMI products may present an opportunity for healthcare providers to charge for treatments over and above historical averages, knowing that even highly expensive treatments will normally be covered by a plan. These increased costs are being felt directly by the insurance providers, who in turn have to raise the costs of their products which were responsible for the increased medical pricing. Claims under an individual international private medical insurance plan should represent about 50 percent of the policy's total premium, and if doctors and healthcare providers are charging more to holders of iPMI policies then Globalsurance expects to see more upwards pressure on premium pricing within the next 1-3 years if this is true. Finally, a case could be made that iPMI premiums are rising because insurers are not capable of, or able to introduce comprehensive individual country pricing (as in the case of DKV and IHI-BUPA, for example, where global pricing is the norm, despite the risk profile being largely concentrated in Asia) which will see blanket premium increases for policyholders in all geographical areas. This will mean that countries like Kenya and Thailand, which have less expensive healthcare systems than countries like Singapore and Hong Kong, will have premium increases as a result of the higher cost of care in other regions. Additionally, because of the unique nature of an iPMI plan, a policyholder in Kenya - one of the lower priced regions - may opt to travel to Hong Kong for treatment. This in turn pushes up the pricing of iPMI premiums in Kenya as 50 percent of a policyholder's expensive healthcare treatment may not occur in Kenya but may happen in a more expensive region. This scenario could be a core reason why companies like IHI-BUPA and DKV levy global pricing increases in an attempt to maintain suitable profitability. If this is the case, then the sustainability of the premium increases being seen throughout the industry must be called into question. As it stands, at 10.8 percent per year, the rate of iPMI premium inflation are far outpacing the growth of individual salaries even within the Upper Middle Classes throughout the world - which may then see the market move towards catering exclusively for High Net Worth individuals and families and Global Multinational organizations as individual consumers find themselves ever more unable to keep up with the premiums being levied by the providers.