You’re healthy, exercising and eating right. You’re not claiming on your policy, so why are your premiums going up?! This is a question we get from clients all the time because it can be frustrating to see your health insurance premiums going up every year for no apparent reason.

We shared some reasons with you in Part 1 but there are some important ones that we’ve missed that can help you understand what can drive health insurance premiums up or down.

Medical Inflation

Medical technologies are improving, surgical techniques are getting better and new more potent drugs are being discovered every year. While this is great, it’s not all good news. As medical treatments improve, they’re also getting more expensive.

Unfortunately, this medical inflation leads to higher claims costs for insurers who then pass on those costs to you in the form of increased premiums.

Frequent Claimants

Another factor that can increase the cost of your health insurance, through no fault of your own, is how many other people are making claims to your health insurer. If a small minority of people make an outsized number of claims, the insurance company must respond by increasing premiums across the board (some groups will be more affected than others).

With Hong Kong’s elderly population estimated to make up around 35.9% of the population by 2064, this is an especially powerful factor. The elderly are more likely to have frequent and expensive health issues that drive up the costs for everyone else.

How Insurers Make Money

Outside of claims costs, another important factor to discuss is how insurance companies actually make their money. They do this in 2 ways: underwriting profits & investment earnings.

An insurer makes underwriting profits if they are able to collect more in premiums than they pay out in claims. They can do this by reducing the amount of claims they pay or by increasing premiums.

But what does an insurance company actually do with those premiums that you pay them? Of course they’re legally required to have enough liquidity to pay claims and deal with economic shocks but they are free to invest the rest and try to make a profit.

If the market is doing well, insurers will want to lower prices so they can attract more money to invest with. If markets are doing poorly, they will rely more on underwriting profits which leads to increased premiums.

Confused yet? Finding health of medical insurance is complicated enough without having to worry about all these potential factors but you don’t have to deal with all of this on your own. Get in touch with a Trusted Union advisor to help you find the right cover for your budget or to review your existing policy to see where savings can be found. You can read Part 1 to get a piece of more information.