Why It Matters

Weigh IP needs carefully

The rise in the amount of health insurance premiums has surprised the market.

With the amount of new premiums rising 25.5 per cent to $59 million in the second quarter, compared with the first, and most new sales coming from Integrated Shield Plans (IPs) and riders, it is a sign that health insurance is gaining traction.

The Life Insurance Association (LIA) Singapore said this is "indicative of more Singaporeans understanding and appreciating the complementary role of IPs to MediShield Life".

It could be a result of the attention given to MediShield Life, which bumps up coverage from MediShield. IPs offer further benefits, but can cost significantly more with age.

The LIA was encouraged, after having concerns about a slowdown in IP sales last year as consumers adopted a wait-and-see approach before MediShield Life started on Nov 1 last year.

More can certainly be done, as only about one in two individuals in Singapore is covered by health insurance. The Government has also rolled out subsidies to ensure premiums stay affordable.

Premiums for private IPs have two parts - a basic portion to pay for MediShield Life and a top-up for the extra benefits.

As transitional subsidies - for premiums higher than MediShield ones - taper off down the road, people should think twice about whether there truly is a need for such a plan from a private insurer.

When the subsidies end after four years - they cover 90 per cent of the difference in the first year, then 70, 40 and 20 and 0 per cent in subsequent years - policyholders could be stuck paying more than what they signed up for.

While the five insurers that offer IPs said in June last year that they would not raise their portion of the premium for 12 months, it remains to be seen as rising costs and the increased use of services hurt profits.

Knowing the full extent of the IPs and what they offer is crucial, and this is why further education on people's needs and wants is pertinent - so that everyone can afford the healthcare they need.

A version of this article appeared in the print edition of The Straits Times on August 16, 2016, with the headline 'Weigh IP needs carefully'. Print Edition | Subscribe