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What are the factors that contribute to policy renewals each year?

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Α number of factors contribute to the renewal increase on policies every year, including:

  • Medical Inflation

Medical inflation is similar to general inflation but is specific to costs associated with the medical- and medical insurance industry. It refers to the increase in costs to support medical trends and developments such as new drugs and technology. Medical inflation also includes the increased availability and usage of these advanced treatments. Healthcare is becoming more effective every year, with average life expectancy increasing across the world. In Latin America and the Caribbean, medical inflation is estimated between approximately 10% and 13%, approximately 5% to 8% higher than general inflation.

  • Increased medical risk

As health typically deteriorates with age, our health insurance premiums tend to increase year-on-year to reflect this increase in risk. This approach allows us to charge a premium which more fairly reflects the risk of the insured. By increasing the insurance premium every year with age, we also aim to avoid large yearly increases which can be experienced in age banded premiums i.e. when a policyholder crosses from one band to the next. Age related increases are generally between 4% and 7% with the exact figure subject to the specific age of an insured member. One point to note where age increases may be higher is between the ages of 18 and 23. Prior to turning 18, an insured member is classified as a child. As the insured moves beyond this age they shift from child rates to adult rates leading to some larger increases

  • Pooled risk

As a member with an individual policy, you form part of a ‘pool’ or group of members which have health insurance with the same company. Individual members are pooled together to spread the risk of high costs of treatments across the pool. As a result if you have a high claim rate or value, you will be protected by the pool of policies and your renewal premium will not be heavily penalised.

  • Currency fluctuation

While premium rates are set at the time of your policy renewal in British Pound Dollars (GBP), claim payments may be paid in other currencies depending on the location and clinic where treatment is received. Over the year, fluctuations in exchange rates between currencies occur leading to a mismatch between the value of the premium in USD and the assumed claims payments in non USD currencies. To ensure that the premium received is sufficient to cover expected costs; exchange rates are monitored and may contribute towards the yearly change in premium rates.