- Australia’s private health insurance sector was significantly impacted by the coronavirus pandemic last year.
- The industry’s profit nosedived due to negligible premium growth and muted investment earnings.
- The rise in market volatility in the earlier part of the year negatively impacted the investment earnings.
Australia’s private health insurance sector was significantly impacted by the coronavirus pandemic last year as profit plunged due to negligible premium growth and muted investment earnings.
The insurance sector margins declined by 2 percentage points to 1.9 per cent in the year to December 2020 on account of deferral of the April 2020 premium increases and other concessions provided to policyholders, according to the Australian Prudential Regulation Authority’s (APRA) private health insurance (PHI) December 2020 quarter report released on Tuesday.
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The rise in market volatility in the earlier part of the year negatively impacted the investment earnings, resulting in industry’s net profit after tax (NPAT) falling to 61.2 per cent to A$558.2 million.
Hospital treatment membership increases
The hospital treatment membership rose by 103,179 persons. The membership in the 50 plus age group increased by 78,200 persons.
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The membership rose by 14,639 persons in the given period among the younger people aged between 20 and 49. Even as the overall membership increased, the hospital coverage as a share of the population saw a marginal fall to 43.9 per cent, compared to 44 per cent in December 2019, implying a continuous decline in the longer-term private health insurance coverage for youngsters.
How December 2020 quarter fared
The hospital utilisation continued to remain below pre-coronavirus levels contributing to limited claims growth (up 1.6 per cent to A$5.7 billion) due to the coronavirus pandemic. The industry recorded a rise in profit during the quarter due to an increase in premium revenue (up 4 per cent) following the October 2020 price increase and stronger investment earnings.
While net margins also improved in the quarter with management expenses growing broadly in line with premiums, they remained below pre-coronavirus levels. The industry also posted a marginal surge in membership levels, with hospital membership surging by 34,801 persons after rising by 104,106 persons in the last quarter.