Sharing the burden

One thing I’m sure all Insights readers look forward to each year is the payment of their private health insurance premiums. Not!

Like buying tyres for the car, private health insurance is one of those things that you pay for regularly, but from which you seem to get no obvious benefit. That thought doesn’t only apply to health insurance, of course. I’m sure we’ve all seen the TV ads of the general insurance company that’s established a “rewards program”. Policy-holders get entitlements to things other than what their policy is intended to cover, so that they feel they’re actually getting something for the cost of their premiums. “Premiums in, rewards out,” is their catch phrase.

Private health insurance can seem like a dead weight among our expenses, can’t it?

Until, that is, you have a need to make a claim. I don’t mean the regular claims where we go to the dentist, say, and get a portion of the cost back from our health fund. I mean a decent claim for a non-routine situation. Like the one I’ve had to make this year when what was expected to be a quick visit to the Emergency Department became a month in hospital, three operations and a lengthy recovery period. (A recovery that has gone well, for those who may be concerned.)

A few days ago I checked my statement of benefits paid. To fund me through this episode my health insurer has covered me to the tune of $30,000. When I add in the payments to cover a more routine operation I had just over a year ago, my total claims paid grows to about $36,000. That’s about six or seven years’ worth of health insurance premiums I’ve claimed back in just over 12 months.

It’s fair to say that I have a new appreciation for the support that private health insurance gives me! It’s doing one of its jobs, which is to smooth out bulky and expensive payments for medical treatments over many years.

However, as I reflected further, I realised that this was only part of the story of the value of health insurance. Another way of looking at it is that in the earlier years – most of my working life – I’ve been paying my premiums without receiving benefits. Others who’ve had to go into hospital have been covered for what would have been bulky, expensive bills for them. That’s turned around in the last 12 months as other policy holders, whose health has remained good, have been providing the funds to pay for my treatment.

Which is, after all, one of the reasons that insurance – of all kinds, not just health insurance – was developed. It’s a risk sharing mechanism. Or to use language that we’re familiar with, it’s designed to share one another’s burdens, to love others as we love ourselves. It’s about members of a community working together to look out for one another. The very first insurance policies were agreements in ancient communities that if someone’s house was destroyed, the neighbours would help to rebuild it. Modern insurance policies are meant to do that same sort of thing.

When the first life insurance policies were introduced, I understand that church leaders were against the concept because they feared it would encourage risk-taking behaviour. However, they came to see that it provided benefits to widows and orphans, the most vulnerable in society at the time. When their husbands and fathers died a life insurance policy ensured they were financially cared for. The change of mind was so complete by the 19th century when organisations like AMP were founded in Australia that it was Christians who were the first directors (e.g. John Fairfax and David Jones).

Contrary to the name of that general insurer whose advertisement I mentioned earlier, insurance isn’t meant to be all about you. It’s not meant to be about premiums in, rewards out just for you, but benefits for those who suffer the misfortunes covered by the insurance policy. Yes, when that misfortune comes to you, it means you’re covered, but the idea that every dollar you put into an insurance policy should be returned to you flies in the face of the community-based notion that insurance is meant to be.

That’s not to say that every health insurance policy is priced correctly, or that the health insurance system can’t be improved or made cheaper and more effective for everyone. But at its heart, insurance is meant to about us, as a community, sharing one another’s troubles and difficult times. I thank the many other policy holders with my health fund for their support of me over the past year, even though they didn’t know that’s what they were doing! And my hope is that I’ll think of them, and not myself, when I pay my premium next year.

 

Warren Bird is Executive Director of Uniting Financial Services




One thought on “Sharing the burden

  1. Warren Bird

    Well, hasn’t the unnamed insurer in this article covered itself in glory at the Royal Commission this week – not!

    Perhaps if they’d focused more of their corporate energy on providing an actual insurance service to all those policy holders, instead of giving them ‘rewards’ or saving them $273 (“$273!” the girl in the car repeats, as if the TV viewers are deaf and didn’t hear what the driver had said in the first place. Can you tell that I really don’t like this particular company?) then they’d have stayed out of this particular unwanted limelight.

    There’s a part of me – the worldly, old man part of me – that wants to say to the policy holders of this company, ‘well, you got what you paid for! Now you know why they’re able to save you money on your policy – because they’re not actually going to cover you for the things you’re insuring.’ But really, that’s probably unfair to them. There’s nothing wrong with looking for a bargain as a consumer and the company dressed it all up with that advertising guff about taking your individual situation into account, etc so that you’re ‘not paying for what you don’t need’ and all that, which sounds like actuaries and others have done their job properly.

    But as with investments, if something seems too good to be true, it probably is. Caveat emptor applies and the lesson is that, if you’re going to switch insurers on the basis of the cost of the premium, then you’d better check their credentials and the fine print of the policy. To reduce your premium they’re going to have to take something back off you somewhere else.

    Sigh. I’m all for consumers getting a better deal, lower cost goods and services, and all that. I’m an economist by training after all! But a good deal requires that the service promised is the service delivered. In relation to insurance, this is far more than just the price to the individual and the service to the individual. As I said in the article, insurance should be all about us being in community together, sharing our burdens and smoothing the financial path of life. It’s not just ‘premiums in, rewards out’. The insurance industry needs to recapture this attitude – and so do all of us as policy holders.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *