Health insurers are offering big incentives to lure customers

Medibank, Bupa and other health insurers are locked in a war for new customers, and consumers can be the beneficiary with big incentives to join or switch. But there are pitfalls to avoid.

Health insurers are offering promotions in a bid to win over new customers.

Medibank and Bupa are offering up to eight weeks free cover along with other sweeteners in an out-of-cycle bid by a large number of health insurers to poach customers from each other.

Analysts at investment bank Macquarie say the insurers usually kick off a price war in the lead up to June 30 each year, when people’s minds turn to tax matters, and whether they should be taking up health insurance to avoid paying the Medicare Levy Surcharge.

But this year the battle for market share has continued on, with almost half of the insurers the Macquarie analysts looked at offering incentives to join or switch.

“The private health insurance market is experiencing heightened competition for acquiring new clients, leading to increased costs associated with customer acquisition,’’ Macquarie says.

“Unlike previous years, this competitive intensity has not subsided post-June 30, the typical peak churn period due to tax incentives, and is expected to continue.”

Medibank is currently offering up to eight weeks free plus up to 50,000 of its internal Live Better loyalty points, which could translate into $500 worth of gift cards, as well as waiving two and six-month waiting periods on extras. This is for new customers only.

Bupa is matching the eight-week free period as well as the two and six-month waiting periods on extras, with its promotion running until February 12.

Consumers should regularly check whether they are getting value for money.

Macquarie said overall, 47 per cent of the brands it looked at were offering some sort of promotion.

Some brands are also offering incentives such as gift cards and frequent flier points.

Mark Blades, an analyst at consumer advocacy group Choice, said similar to other financial products such as home loans, it was always good to regularly check offers in the market to see if you are getting value for money.

He said there were a number of pitfalls to avoid, however.

This included checking the terms and conditions to see whether the discounts offered were immediate, with some requiring customers to stay on board for more than 12 months.

“The big thing is to make sure you’re reading the terms and conditions very clearly,’’ Mr Blades said.

With the current Medibank offer for example, to qualify for the “weeks free” promotion, new customers have to set up direct debit payments, and while the first six weeks free kicks in after 42 days, the final two weeks free only applies after 14 months.

Mr Blades said calculating the full year cost, rather than being dazzled by promotional enticements, was the best strategy.

“What we’ve seen with a lot of policies, they cover the same thing but when we compare them between funds there’s a difference of hundreds of dollars over a full year,’’ he said.

Mr Blades said analysis by Choice over years had shown that people struggle to get value from extras, and should consider whether they might be better off-putting that money in the bank and using it to pay for costs as they arise.

And if people do switch between funds, they should be aware that any extras used with their previous insurer will likely be taken into account against their entitlements under a new policy.

Mr Blades said parents of children over the age of 18 needed to be careful when switching also, with funds employing a range of different conditions for deciding whether adult children remain dependents for coverage purposes.

And anyone considering switching should call their own insurer first, Mr Blades said, with client retention teams at all firms able to offer sweeteners to stay, and some products at the higher end not even offered through online portals.

Originally published as Health insurers are offering big incentives to lure customers