Posted on Mar 19, 2015 by Travis Jones
For several years now, Pacific Prime has brought the International Private Medical Insurance (IPMI) industry annual reports outlining the rates of inflation among major insurers. Now, to ensure understanding of the information published, we would like to further analyze our findings. Here we examine Pacific Prime’s methodology in reporting IPMI inflation, as well as where care should be taken in drawing conclusions from it.
It is important to stress to readers of our reports that Pacific Prime is dedicated to the quality and accuracy of our data. With this in mind, when analyzing premiums and pricing, we have to choose whether to provide data on the prices offered to the general public through each insurer, or the best premiums available to Pacific Prime’s clients through any special arrangements that we may come to with insurers.
While Pacific Prime could take promotions and discounts into account and take the appropriate measures to remove them from our reporting of premium inflation, we deem it more beneficial to interested consumers to reflect true pricing at the time of our reporting to give a more accurate depiction of the current landscape of the market. Unfortunately, this methodology can lead to skewed numbers when the focus of our reporting is inflation percentage.
Year-on-year comparisons using such methodology will inevitably lead to some insurers having a seemingly high inflation percentage rate, when, in actuality, the percentage shown may not be an accurate depiction of a given year’s rate.
Case in point
For example, 2014’s IPMI Inflation Report reported that leading insurer William Russell had the highest annual inflation of the year among insurance companies covered within the report. At first glance, one might assume that this was simply because the insurer raised its premiums at a greater rate than other insurers. However, this is not the case.
In 2013, William Russell ran a temporary promotion that gave an additional discount to Pacific Prime clients. This discounted rate was the one that Pacific Prime used in the annual IPMI inflation report, and was not indicative of William Russell’s published book rates. Therefore, when the promotion ended, the inflation shown by Pacific Prime’s data was artificially exaggerated, and not a true representation of William Russell’s actual inflationary rise between 2013 and 2014. Looking at the 5 year average, it can be seen that, even with the artificially high inflation rate of 2014, William Russell still did not have the highest inflation rate since 2010. Thus, looking solely at the data for 2014 would not do justice to an insurer that has a greater track record of effectively managing its premium inflation.
In actuality, among the insurers covered, William Russell had the 2nd lowest average inflation rate in 2013, and the lowest average inflation in 2012. Furthermore, in 2012 and 2013, William Russell’s average IPMI inflation rates were lower than in the previous year.
As a leading player in the IPMI market for the past 20+ years William Russell has a long established track record of providing quality insurance products at an excellent value. As expatriate insurance specialists, William Russell has worked hard to innovate new ways to control premium inflation. In fact, in 2013 William Russell introduced new measures to combat inflation in the form of new provider and limited direct billing networks. Clients that chose to utilize these were able to immediately see significant savings on their premiums.
It’s plain to see that it would be unwise to judge a single insurer based on a single year’s inflation, and that care should be taken when drawing conclusions from the data.
Getting a clearer picture
So what can be done to ensure that you are getting an accurate representation of the market and how inflation is trending, not only for International Health Insurance providers as a whole, but also for individual insurance companies? First, be sure to look at insurers’ 5-year inflation averages (or beyond). Pacific Prime provides these in our annual reports so that readers will get a better idea of how a particular insurer’s year-on-year inflation performance has been over a longer period of time. Focusing solely on the most recent year’s data can lead to a warped view of an individual insurer’s performance when extenuating circumstances cause them to appear as an outlier with a particularly high or low IHI inflation rate.
In addition to these types of anomalies, it is important to remember that Pacific Prime is reporting percentages, which are not indicative of which companies have the highest or lowest premiums. While a company may have had the largest year-on-year percentage increase in premiums, they still may have lower average actual premiums than their competitors. In this way, inflation reports should be used as tool for monitoring industry trends, and not as a way to find the best prices on International Private Medical Insurance. Such information simply cannot be found in the data reported with regards to Pacific Prime’s IPMI Inflation Report, so to make assumptions about pricing based on the report is not realistic.
Rest assured that Pacific Prime will continue to bring you the best possible International Private Medical Insurance reports, with the most accurate data possible. In addition, we will continually strive to improve our information gathering and reporting wherever possible. We greatly appreciate the support we have received from those in the IPMI industry, as well as from consumers and others who are interested in monitoring trends in industry pricing. Be sure to keep an eye out for future reports from Pacific Prime, and contact us here.