New insurance market updates: Insurance companies, software update
The new insurance market update by the insurance industry has raised the benchmark cost for policies, as it comes on the heels of a slew of updates that are being rolled out to the insurance market.
While the new rate hikes are still only in the first week of the new year, they have caused major headaches for companies and have resulted in some companies cancelling policies.
In a blog post, the Association of State Insurance Commissioners (ASIC) said the latest updates to the rates have resulted from “a combination of software changes that have significantly lowered the benchmark for the rates they offer”.
The most important of these changes was the addition of the “Insurance Direct” service that allows companies to choose the level of insurance that they offer on behalf of their customers.
The association said that this was done by taking a number of factors into account including the number of policies the company is offering, the rate structure it is offering and the cost structure of the policy, which will vary depending on the level and the insurance company’s other offerings.
This is not the first time the ASIC has issued updates to insurance rates, after the industry-led push to lower rates led to a slew to insurance companies canceling plans.
The latest updates, which are still being rolled-out to the market, come on the back of a raft of changes being rolled in to the markets in the last two weeks.
This includes: – A further reduction in the benchmark rate of premiums for policyholders under the age of 65, from 3.6% to 3.3% on average for policies with a $250,000 to $500,000 deductible; – An increase in the standard maximum amount the insurer can offer in an initial policy renewal to $250 per month; and – New caps on the amount insurers can offer on each policy renewal.
This will see some companies’ rates rise, but will not cause a complete rollback to policies as many of the previous premium increases will still be in effect.
The ASIC also said that it was not possible to predict the impact of any new policy renewal rates for a given policyholder, as some companies will still offer their customers an option of keeping the policy for a period of time.
The new insurance rate hikes by insurers will be a “significant blow to consumers”, the association said.
The Association of States Insurers (ASI) said that the new changes to rates were necessary to ensure the availability of the insurance and maintain the quality of care for consumers.
ASIC said that there will be more than $5.3bn of cost-sharing reductions for consumers and businesses in the coming years, with this reduction in coverage likely to cost $2.4bn.
“With these new rates, insurance companies will be forced to increase rates in order to remain competitive,” said Anupam Kher, president and CEO of the Association.
However, the association warned that the latest rates, while being welcomed, do not reflect a perfect picture of the industry.
It said that, while there has been a shift towards a higher level of coverage, consumers and small businesses will still have to face higher out-of-pocket costs, as well as having to pay higher out of pocket costs for out- of-pocket medical expenses.
“This will mean increased costs for people with medical conditions that will impact their ability to access insurance, and it will mean an increase in out-pocket bills for small businesses as they will be unable to afford the out-call medical costs,” Kher said.