Medibank gaining members after decade of desertion

Medibank Private says it is well positioned to eke out ­market share growth this year after a decade of declines and chief Craig Drummond says the group could snap up smaller ­rivals if Labor wins the coming federal election.

Medibank Private says it is well positioned to eke out ­market share growth this year after a decade of declines.

And chief executive Craig Drummond says the group, the biggest Australian health insurer, could snap up smaller ­rivals if Labor wins the coming federal election and there is industry consolidation under its policy to cap premium increases.

Speaking at the company’s annual meeting in Melbourne on Wednesday, Mr Drummond said Medibank was growing policyholder numbers ahead of its ­aspirations.

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In the first four months of the financial year, Medibank gained 8000 members, he said, compared with a loss of 1000 in the same period last year.

“I am pleased to report that we have stabilised our market share, 18 months ahead of our initial milestone,” Mr Drummond said. In 2016, he said he wanted to stabilise market share by the end of 2019.

“The most recent (prudential regulator) data shows that we grew our market share by five basis points in the second half of the financial year,” he said.

“We are now targeting modest market share growth in the current financial year.”

Medibank chair Elizabeth ­Alexander said it was the first time in a decade that the group’s market share had grown over a six-month period.

Medibank chief executive Craig Drummond at the health insurer’s annual meeting in Melbourne on Wednesday. Picture: AAP

Complaints to the industry ombudsman had also fallen, and satisfaction levels — as measured by the standard known as a net promoter score — had ­improved, Ms Alexander said.

Mr Drummond repeated his concerns about Labor’s proposal to cap health insurance premium increases at 2 per cent a year for two years. “(It) is an ambition we can appreciate, but it will be challenging,” he said.

Over the past decade, healthcare costs in Australia had risen at a rate 4.5 percentage points above inflation, he said, “and unfortunately capping ­premiums will not change these costs”.

Asked about possible industry consolidation under Labor’s policy, Mr Drummond said Medibank might look to buy other players. This could happen if they became “stressed” due to the new limitations, he said.

“If there are acquisition ­opportunities for those players, we will look at that.”

Mr Drummond said the group had “said publicly we have no interest in (buying) health insurance businesses … (but) under a stressed scenario that could be different.”

Medibank was doing its part to keep costs down by increasing its productivity targets, he said, and management expenses fell $11.2 million in the past year.

“We know affordability continues to be a key concern for our customers, so productivity improvements remain an important target for the team,” he said. “We will have cut $60 million from our management costs in the three years to the end of the 2020 financial year — an increase of $10 million on the previous target.”

Mr Drummond took over Medibank in mid-2016 as the company was losing customers and racking up record numbers of complaints.

In the year to last June, its profit fell 1 per cent to $445.1 million.

But its operating profit from health insurance spiked 7.7 per cent to $535.6 million.

Over the year, it added 48,000 customers, compared with a loss of 24,000 the previous year. Medibank shares closed down 0.4 per cent on Wednesday at $2.74.

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