SE Asian health insurers face soaring costs

SE Asian health insurers face soaring costs

KUALA LUMPUR (Reuter): A booming demand for health care services in Southeast Asia is threatening the long term stability of insurers who face soaring costs and rising claims, Industry executives said on Thursday.

"Until the insurance industry starts to work more closely with the hospitals then there will be some long term problems of profitability that will stay with the market for some time," said Duncan Lord, Asia Pacific health manager at Swiss Reinsurance in Singapore.

Lord told the second Association of Southeast Asian Nations (ASEAN) Insurance Congress in Kuala Lumpur that health had emerged as one of the most potentially profitable sectors of insurance business in the region, but also one of the most prone to excessive costs.

"Costs are running well above consumer price inflation in many countries and this is a real issue for insurers," he said.

Lord said the rise was a combination of consumer price inflation, rising medical technology costs and the belief in some quarters that insurers supplied unending sources of revenue which could stifle the market in its infancy.

Industry analysts estimate health spending to be about three percent of gross domestic product on average in ASEAN, which groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

They say around five percent of total insurance premiums is spent on health insurance products.

This figure is set to grow dramatically as pressure mounts on governments to improve health care provision and they turn to the private sector rather than embark on massive public spending rounds, they say.

In Thailand, where private health insurance has a 15-year track record, the market is now at risk of collapse in the wake of a boom in luxury health care that caters only for about 10 percent of the population.

"Nearly all Thai health insurers have registered a loss on both their individual and group plans," Nipit Piravej, senior vice president of medical insurance at Ayudhya CMG Life Assurance in Bangkok, told delegates.

Nipit said an unregulated referrals system and a lack of control on the appropriate use of expensive medical technology had "created a lot of improper services, inefficient resource utilization and poor outcomes", for insurers.

One major factor fueling the cost explosion was the growth of an affluent middle class, said Henry Herrera of Asia Life Assurance Corp in the Philippines.

"These people are not interested in no-frills services from government providers in over-crowded hospitals with out-dated equipment," he said.

Instead they demanded private suites and the latest technological body scans for even the simplest of ailments, he said.

"Health insurance is almost a status thing. It's certainly a big element of the buying process in some countries," said Lord.