More IP insurers may mean an increase in premiums

The news that AXA Life Insurance Singapore will be given the go-ahead to offer Integrated Shield Plans (IP) makes me wonder: Will this increase competition or increase premiums ("AXA to offer Integrated Shield Plan insurance"; Wednesday)?

This move does not make sense if it is to increase competition. A person with medical conditions cannot just switch to a cheaper insurer.

Premiums are also likely to go up.

With Singapore's ageing population and higher life expectancy, the chances of people having pre-existing medical conditions will increase.

So, an insurer with a pool of clients who cannot switch insurers due to their medical conditions has to attract new clients to increase the risk pool. But, because Singapore's birth rate is low and the number of insurers is increasing, the pool of potential clients is going to shrink.

Because birth rate is low and the number of insurers is increasing, the pool of potential clients is going to shrink. The insurer may not be able to increase the risk pool sufficiently, thus, premiums have to go up.

The insurer may not be able to increase the risk pool sufficiently, thus, premiums have to go up.

Adding one more IP insurer is easy now. But will it be easy to consolidate and reduce the number in future, if premiums get out of hand?

I know the Government has good intentions. I hope that it has taken this into consideration before introducing new competition.

Teo Kim Huat

A version of this article appeared in the print edition of The Straits Times on March 25, 2016, with the headline 'More IP insurers may mean an increase in premiums'. Print Edition | Subscribe