HBF exits policy comparison websites

Private health insurer HBF has pulled its products from comparator websites after analysis revealed the industry paid brokers over $150m.

HBF managing director John Van der Wielen said he believed that the “churn” — consumers swapping or downgrading policies — created by the comparator sites and the cost of using those sites was driving premiums up.

Private health insurer HBF has pulled its products from comparator websites after its internal analysis revealed the industry paid brokers more than $150 million last year.

As affordability concerns hit the sector, health insurers have also warned that concerns about financial advice that were raised in the banking royal commission should serve as a warning to the private health-insurance sector about commission-based advice.

John Van Der Wielen, chief executive of not-for-profit insurer HBF, said he believed that the “churn” — consumers swapping or downgrading policies — created by the comparator sites and the cost of using those sites was driving premiums up across the industry.

“The market is shrinking but marketing and commission costs are increasing,” he said.

“In a shrinking market where costs of new business are too high, it can actually be the first one off the ‘merry-go-round’ that wins. We want to make sure we can give our existing customers better rates, not spend too much in new business.”

Comparator websites generate income by charging a commission to the health-insurance fund the consumer selects. The commissions paid to comparator websites can be more than 30 per cent and there have been concerns about the transparency to consumers on what insurers pay to the sites. It is also understood that in some instances, there is an incentive for comparator sites to churn new business every two years, after commission from a sale has been paid.

Internal analysis of the private health-insurance market by HBF estimated that more than $150m had been paid in new business commissions to comparison websites in the past financial year.

Dwayne Crombie, health insurance boss at Bupa, which has some of its policies on one comparator website, said the banking royal commission had put the spotlight on non-transparent, commission-based selling of products.

“I have seen some scripting on Bupa used by a site over the last few months that is incorrect. That sort of behaviour does not help the comparator sector to create much credibility about the quality of its advice and what it is motivated by,” Mr Crombie said.

Christopher Zinn, chief executive of the Private Health Insurance Intermediaries Assoc­iation, said the websites clearly disclosed that commissions were paid to insurers, and which brands were available on the site for comparison.

“There is a cost to insurers to use comparison sites but there is also a cost to using Google AdWords,” he said.

“Advertising a product comes at a cost and insurers pass on marketing costs, just as they pass on staffing costs ... but can you say it boosts premiums?”

Comparison websites have become more widely used as consumers find it increasingly difficult to navigate the 27,000 different private health-­insurance policies offered by the 37 registered private health-­insurance funds. The government hopes to reduce confusion by classifying a policy as either gold, silver or bronze. Consumers can also access a free government comparator website.

Delia Rickard, the deputy chairwoman of the Australian Competition & Consumer Commission, said she did not think most consumers knew health funds were paid a commission to refer business. “There is potential to get it right if the sites cover a high percentage of the market and do not let commercial arrangements influence how they give advice,” she said.