Insurers secretly jack up premiums by ditching old policies and sneaking in new, overpriced ones
- Replies 3
As we age, we often rely more on various forms of insurance to provide peace of mind and financial security.
Health insurance, in particular, is a critical safety net for many Australians, especially those over 60 who may be facing increased health challenges.
However, a concerning trend may be hitting the wallets of unsuspecting policyholders.
Recent reports have highlighted a disturbing practice among some private health insurers, which could be costing millions of Australians dearly.
This practice, known as 'product phoenixing,' involves insurers discontinuing an existing policy and replacing it with a nearly identical one at a higher cost.
This sneaky maneuver allows insurers to sidestep regulations that limit premium increases to once a year, subject to approval by the federal health minister.
The Commonwealth Ombudsman's report has illuminated this issue, revealing that the average new customer now pays $38 more monthly in premiums and $184 more in excess fees.
Health Minister Mark Butler has condemned this practice, which hurts customers financially and restricts their ability to shop for better deals.
‘It is clearly against the spirit of the law, and it is an under-handed, largely secret, way of health insurers raising their prices.’ he said.
‘If two members of an existing fund with essentially the same product are paying prices that might be 20 per cent different...you have to describe that as price gouging.’
This issue is especially prevalent in 'gold' tier insurance policies, which offer a higher level of coverage for services such as maternity and mental health care.
Many Australians rely on these services, and unexpected cost increases can be particularly jarring.
For example, one insurer was found to have closed existing gold policies and then launched nearly identical ones in 2023 at prices 21 per cent higher than the old policy's average premium.
They repeated this tactic in 2024 with a 14 per cent more expensive product.
Such increases are far beyond expected from normal inflation and healthcare cost rises.
The Australian Private Hospitals Association has weighed in, with chief executive Brett Heffernan calling out insurers for profiting at the expense of both members and hospitals.
‘Is anyone surprised insurance companies are gouging their members like they gouge hospitals?’ he said.
‘Enough is enough.’
‘It’s time the federal health minister engaged in the hospital crisis burning around him.’
The situation is becoming untenable, with public waiting lists growing and private hospitals under financial strain.
The federal health minister has notified the industry, urging insurers to respect their social licence and warning of potential legislative action if practices do not change.
Meanwhile, Private Healthcare Australia's industry body has acknowledged the need to work with the government on these issues.
It also highlighted the challenges of providing affordable products in an aging population and inflationary environment.
Have you experienced unexpected premium hikes from your health insurer? How has this affected your budget and peace of mind? Share your stories and tips in the comments below.
Health insurance, in particular, is a critical safety net for many Australians, especially those over 60 who may be facing increased health challenges.
However, a concerning trend may be hitting the wallets of unsuspecting policyholders.
Recent reports have highlighted a disturbing practice among some private health insurers, which could be costing millions of Australians dearly.
This practice, known as 'product phoenixing,' involves insurers discontinuing an existing policy and replacing it with a nearly identical one at a higher cost.
Australians are paying more for health insurance due to insurers' practice of 'product phoenixing,' which allows nearly identical policies to be offered at higher rates. Credit: iStock
This sneaky maneuver allows insurers to sidestep regulations that limit premium increases to once a year, subject to approval by the federal health minister.
The Commonwealth Ombudsman's report has illuminated this issue, revealing that the average new customer now pays $38 more monthly in premiums and $184 more in excess fees.
Health Minister Mark Butler has condemned this practice, which hurts customers financially and restricts their ability to shop for better deals.
‘It is clearly against the spirit of the law, and it is an under-handed, largely secret, way of health insurers raising their prices.’ he said.
‘If two members of an existing fund with essentially the same product are paying prices that might be 20 per cent different...you have to describe that as price gouging.’
This issue is especially prevalent in 'gold' tier insurance policies, which offer a higher level of coverage for services such as maternity and mental health care.
Many Australians rely on these services, and unexpected cost increases can be particularly jarring.
For example, one insurer was found to have closed existing gold policies and then launched nearly identical ones in 2023 at prices 21 per cent higher than the old policy's average premium.
They repeated this tactic in 2024 with a 14 per cent more expensive product.
Such increases are far beyond expected from normal inflation and healthcare cost rises.
The Australian Private Hospitals Association has weighed in, with chief executive Brett Heffernan calling out insurers for profiting at the expense of both members and hospitals.
‘Is anyone surprised insurance companies are gouging their members like they gouge hospitals?’ he said.
‘Enough is enough.’
‘It’s time the federal health minister engaged in the hospital crisis burning around him.’
The situation is becoming untenable, with public waiting lists growing and private hospitals under financial strain.
The federal health minister has notified the industry, urging insurers to respect their social licence and warning of potential legislative action if practices do not change.
Meanwhile, Private Healthcare Australia's industry body has acknowledged the need to work with the government on these issues.
It also highlighted the challenges of providing affordable products in an aging population and inflationary environment.
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