PHIIA Submission to Senate inquiry into PHI affordability & Value Aug 2017

PHIIA Senate Inquiry submission final

Below is a brief extract from the opening comments to the submission. It’s hoped we may be invited to appear at the public hearings scheduled for Sydney on Oct 31. Feel free to read the whole document it is not too long.

Extract from opening comments:

All members work within the terms of our self-regulatory binding code of conduct which ensures transparency, non-conflicted remuneration and adequate choice to build confidence and capacity with consumers.

The ACCC Private Health Insurance Report 2015-16states that 40% of consumers who switch their health cover do so through the commercial comparators.

PHIIA’s own data suggests that another 30% of new entrants and switchers do at least some research via a comparator service before buying directly from a fund.

We believe that the myth that commissions/fees paid to comparators somehow inflate the premium price deters some consumers from purchasing from the comparator and instead of going direct to the fund. In fact, there is no additional cost to the consumer by using comparison services. Their advice is provided to customers free-of-charge and the policy price is the same whether they go via a comparator or buy direct from a fund.

We would like to address a similar misapprehension included by BUPA in reports of their submission to this inquiry. Bupassubmission claimed comparators commissions somehow inflate the cost of all premiums for all consumers. In reality the comparators are just another sales channel, such as TV, Facebook, Google etc., among various marketing costs. In many instances, the cost of member acquisition via comparison sites is more cost-effective particularly for smaller funds than undertaking their own marketing activities and sales channels.

While not all funds choose to make their policies available to customers via commercial comparison sites, many funds do, including several of the largest and most well-known funds. Smaller challenger brands especially make effective use of comparison sites low barrier-to-entry marketing models.

In response to calls for further regulation of the intermediary sector, we would like to highlight the sector already has considerable oversight. For exampleiSelect is regulated by a number of government agencies including ACCC, APRA, ASIC and also a fully compliant member of PHIIA and are also signatory to our Code of Conduct.

We believe our self-regulated system empowers consumers and drives competition in the market in ways which enhance, rather than detract, from the value and affordability of PHI.

However, there are two barriers in particular which we believe impede the smooth flow of these positive functions. More detail is provided below against the relevant terms of reference.

The first involves the handling by the health funds of the switching process and delays above and beyond what a reasonable consumer might expect. There are also issues in terms of behaviour and statements of so-called save teams that aim to retain customers who have already elected to change provider.

The second revolves around access to data and the inability of PHIIA members to get up-to-date, detailed information on all policies, including those no longer being marketed.

Given fast-moving technological developments, it’s understandable and desirable that any regulations insist this data is available for interested third-parties in portable and readable electronic formats that facilitate genuine comparison in the benefit of customers.