Rugby World Cup boosts health insurer profits

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The Rugby World Cup has been listed as a key factor behind two Australian health insurers’ profit increases, it has been reported.

Industry analysts have identified that Medibank and nib have recently been paying out smaller proportions of their premiums to members making claims.

There was also a sharp drop in the number of operations and other medical procedures in Australia’s private hospitals during September-October last year, meaning fewer patients making claims on their insurance.

With the timing coinciding with the Rugby World Cup in England, analysts believe that points to the large number of specialists and surgeons who took time off to go to the event and stay on for a holiday.

Morningstar senior equity analyst David Ellis told Business Insider Australia that while there was also an underlying trend of few claims going through private hospitals: “Both nib and Medibank both said they thought that that may have been one of the reasons why there was – in their words – a lot lower private hospital utilisation.

“They both thought that may have been a reason they number of claims had declined.”

It was well known that there was a historical connection between the medical world and rugby, Business Insider reported, given the strong tradition of the sport at Australian and New Zealand universities with older medical faculties.

Former World Cup-winning captain of the All Blacks, David Kirk, had a medical degree, BI said.

The figures seem to back it up - between the two half years, Medibank’s payout proportion fell 3.3 percentage points to 82.8%.

This effectively increased the health insurance operating profit to 8.8% from 5.8% - a jump of more than half – to AU$271.7 million.

And nib described an easing of what it called a ‘claims inflation’ which contributed a 170 basis point improvement to its gross margin of 15.1% in the first half of 2016 compared to 13.4% in the corresponding period.

As of next month, both companies will be able to charge their members more, after the federal government approved a 5.64% life in premiums for Medibank and 5.55% for nib.
And with no Rugby World Cup to rely on this year this is no doubt most welcome.