There are a few determining factors that affect the premium costs. These are as follows:

  • The member’s age
  • The claims history
  • The underwriting method
  • The level of cover on the policy and the choice of hospitals covered
  • Cost containment features used such as an excess or an outpatient limit
  • Height, weight and smoker status
  • Insurance Premium Tax changes
  • Medical inflation

Each insurer has a different method behind their premium cost calculations. Some insurers are ‘non-claims’ related, meaning that the individual claims on the policy do not determine the premium costs at renewal. These insurers look at the claim:loss ratio of their whole book of business and determine all premium costs for all members based on their previous years performance.

Other insurers will look at the individual’s health status and assess their premium costs based on the perceived risk of that individual, looking at their height, weight, smoking status and level of engagement with regular physical activity.

Insurers that use claims history to determine premium costs, usually offer No Claims Discounts (NCD). This will benefit members who do not claim, as they will get increased percentage of NCD. There is also a downside to this, which means that if a member has a large claim, they will face much higher premium costs next year, due to a reducing NCD.