Insurance firms must be made to justify higher premiums


Michael Tan Hoe Heng

Published: 4:02 AM, January 16, 2014
Updated: 12:30 AM, January 17, 2014

I see two current issues regarding insurance that impact cost of living. One is the wide range of premiums for health insurance offering similar hospitalisation coverage and the ability of insurers to hike premiums by a large quantum upon renewal.

If a noodle stall increases prices by a dollar, one can switch to another food stall. But it is not so easy to switch insurers. Do insurers not need to justify premium hikes beyond a certain percentage?

One could argue that competition ensures insurers adjust their premiums reasonably in order not to lose customers. But the wide range of premiums shows that there is market failure — that is, many people lack knowledge about the plans.

There is nothing wrong in having a range of pricing, just like having three- and five-star hotels. But would consumers know if they are paying five-star prices for a three-star product?

The insurance industry’s response has always been that benefits differ. However, to ensure transparency, it should be mandated that insurers show customers, before they sign on the dotted line, a table of comparison of all the premium plans offered by insurers here. In this way, insurers have to justify higher premiums for the same class of hospital ward by highlighting the difference in benefits. And where the premium is the lowest, the insurer should highlight what is not covered, compared to other insurers.

The second issue is about fire insurance: Condominium home owners have to pay two premiums covering the same condo, one by the management corporation and another by the financing bank. (“Why must home owners bear banks’ risks with loan insurance?”; Jan 14)

The extra insurance is said to “protect the bank’s financial interest”. So, it is strange that banks do not charge an extra insurance premium for car loans, given that some cars can be as expensive as a condo unit.

Similarly, in health insurance, many employees are covered by their companies for hospitalisation, but they still buy hospitalisation insurance in case they lose their jobs or are in between jobs. Again, one would be paying double for the same coverage.

Such wastage must be stopped. It is time that Singaporeans could have portable medical benefits beyond MediShield.