Nib Holdings managing director Mark Fitzgibbon wants to bring back the days before 1970s prime minister Gough Whitlam created Medicare – when two-thirds of us had private health insurance.
Fresh from reporting a 65 per cent increase in net profit of $71.8 million, and solid policyholder growth in a soggy market, Mr Fitzgibbon says the industry needs to be more ambitious.
The share of population covered by hospital plans fell below 47 per cent last year, but Mr Fitzgibbon said the industry risked missing opportunities if it focused on only defence.
"At the same time we need to be thinking about how do we create a future in which 70 per cent of the population have health insurance – and it did before Gough Whitlam introduced Medicare," he said.
"If we spend all our time defending what we've got, we'll never get that 70 per cent of the population. So what kinds of policy changes and settings do we need to incite consumers to that level of participation? What else can we do to give people another reason for having health insurance – particularly young people?"
Examples of initiatives driving participation included Nib's Whitecoat, its online practitioner rating platform, which has been joined by rivals BUPA and HBF. "We see that as a real game-changer," Mr Fitzgibbon said.
He said Nib could reward policyholders with lower premiums if its underwriting margin remained above its target range. Strong growth in premium income and moderate claims growth of just 3.4 per cent left Nib with a fat net underwriting margin of 8.7 per cent.
Ms Fitzgibbon said that with the benefit of hindsight the company had "overshot a little" with last year's 5.55 per cent premium increase, and this was partly why it had put in for an increase of just 4.48 per cent this year – lower than the average 4.84 per cent.
Nib expects the net underwriting margin to contract to the target range of 5-6 per cent in the second half as claims growth returns to a more normal 4-5 per cent and other costs increase.
"We don't aim to make more than 6¢ in the dollar at the net level. So to the extent that claims inflation remains low, we'll look to give that back in lower prices," Mr Fitzgibbon said.
Greed
"We don't want to be greedy and run the risk of undermining our price competitiveness."
Nib shares were 8 per cent higher at $5.08 in late-afternoon trade, after rocketing to $5.43 earlier. Directors declared a fully franked interim dividend of 8.5¢ –- up 48 per cent – out of 66 per cent higher earnings per share of 16.4¢, and upgraded full-year profit guidance.
The health insurer bucked the industry trend of flat policyholder numbers to report a 2.1 per cent increase during calendar 2016.
Mr Fitzgibbon said Nib accounted for more than half the 75,000 growth industry wide – a sharp contrast to Medibank Private, which lost a net 41,000 policyholders. Overall industry growth was down from $120,000-$180,000 historically "but that didn't stop us doing well in those conditions", Mr Fitzgibbon said.
Qantas
The Newcastle-based group's result benefited from strong premium growth – especially from the "white label" relationship with Qantas – in a broadly flat market, and a doubling in investment income.
Premium income grew 6.2 per cent to $829.8 million, while claims increased just 3.4 per cent to $686 million. Total revenue was up 7 per cent to $1.01 billion and the gross margin jumped to 17.3 per cent from 15.1 per cent – the highest since 2003.
The company updated its full-year profit guidance, saying full-year underlying operating profit was expected to be in the range of $140 million to $150 million. Underlying operating profit was up 43 per cent to $95.2 million in the half-year.
Mr Fitzgibbon said the company was making a concerted effort to keep a lid on claims inflation and premium growth, and Nib's average premium increase of 4.48 per cent for 2017 is the lowest in 14 years and below the industry average.
