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With the rise of the internet, came the rise of the comparison site – a handy tool designed to allow consumers to compare various products side-by-side, without the hassle of having to visit multiple sites. What could be so wrong about that?
According to certain health funds, there is a lot wrong with that – when you’re talking about health insurance comparison sites at least.
Australia’s largest health insurance comparison site, iSelect, and Australia’s biggest health insurer, Medibank Private, are now going head to head over fees, commissions and who is really to blame for higher premiums.
What the health funds say
First up, we have Medibank Private, the government-owned private health insurance provider with 3.7 million members. Medibank claims the growth of health insurance comparison sites has pushed up the price of premiums, due to the commission they charge health funds.
Medibank Private managing director, George Savvides, said the commissions paid to the sites have driven up the cost of premiums, a cost that is ultimately paid for by the consumer.
“Say you’re signing up for a $2000 policy – you don’t know that you’ve just committed $800 for that policy as a charge to the company that put that product on that site,” he said.
“Now you as a purchaser are not paying for that directly, you’re charging the manufacturing organisation for putting that product on that site. But ultimately that money plays itself way back to the price of that product.”
Medibank denies the assertions that comparison sites help to keep costs down for consumers. Savvides argued comparison sites “haven’t really changed the dynamics of affordability. In fact, I’d argue they’re adding to costs because of the commission.”
At the same time, Bupa Australia – after recently settling its claim against iSelect for misleading and deceptive advertising – has said it wants to “work with the government to develop appropriate regulation” for health insurance comparison sites. Medibank agrees with this. Savvides said, “We think there’s a disconnect in the legislation, so we’ve raised that with the departments and we’re advocating for some reform there.”
What the comparison sites say
In the opposing corner, we have the health insurance comparison sites, led by iSelect.
iSelect chief executive Matt McCann said they have done nothing wrong. As a comparison site, he said iSelect had increased the size of the private health insurance market, helped consumers find appropriate insurance, and had always been clear about commissions.
It’s perhaps worth noting at this point that comparison sites account for more than 20% of sales in the private health insurance industry. It’s also worth noting that this is the industry that reported increased premium revenue of $17.35 billion and profit of $1.17 billion last year.
While it seems comparison sites may be taking a piece of the pie, that pie is not suffering in size or wealth.
McCann also pointed out that comparison sites helped to save health funds money on advertising, allowing them to do “it in a cost-effective way”. He said comparison sites allow health funds to “build products that suit customers without the need for mass-market advertising”.
It’s estimated that the private health insurance industry spent $150 million on media in 2012, which is roughly double the amount spent in 2008. When it comes to growth, McCann said comparison sites play an important role in the private health insurance industry.
“Those [funds] that don’t participate in the comparison channel have found it hard to grow in this market,” he said. “And for us, funds wouldn’t use us if we weren’t an efficient form of distribution for their products.”
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