How even sick people can switch insurers:
Until 2008, it was discussed that the ageing provision could only be transferred when changing insurers if the transfer value was determined according to the individual health risk of the insured, i.e. if the sick person received more ageing provision than the healthy person. If the sick person does not take enough ageing provision with him to offset the risk surcharges levied by the new insurer, the sick person has poorer chances of switching. The consequence is that the increased switching of healthy persons, taking their ageing provision with them, causes the sick to accumulate with the previous insurer, which leads to segregation and additional premium increases.
Because until then the corresponding calculation of an ageing provision to be transferred in line with the individual risk was not yet considered to be practically solvable, the private health insurance industry had initially rejected any transfer of the ageing provision. The legislator, on the other hand, did not consider the reference to certain “actuarial difficulties” to be relevant in comparison with the requirements for more competition in private health insurance.
Since 2009, the following has now applied: ageing provisions are individually allocated and transferable – this is what the law says and the Federal Constitutional Court has confirmed this.
The problem of increased segregation still exists, of course, but the starting point for consideration is now no longer to prevent segregation but to mitigate the consequences and problems associated with it. This means that considerations as to how the ageing provisions can be allocated in a way that is at least to some extent more in line with individual risks are becoming increasingly important. Even the German Actuarial Association has set up a working group on this subject, which is looking into practical solutions and has reportedly made progress.
On the scientific research side, Stefan Rosenbrock has dealt with the topic in several publications and lectures since 2007. In his work “Die risikogerechte Übertragung von Alterungsrückstellungen in der Privaten Krankenversicherung” (The risk-adjusted transfer of ageing provisions in private health insurance) – published by Verlag Versicherungswirtschaft at the end of 2012 (149 p., € 42.00) – Stephan Rosenbrock develops and publishes for the first time a closed model for the risk-adjusted transfer of ageing provisions that can be implemented without any changes to the calculation model of private health insurance. The basic idea is to adjust the ageing reserve to be allocated by an approximate – positive for the sick, negative for the healthy – compensation amount for the individual risk of illness, which, added up over the entire company and all tariffs and insureds, just about cancels itself out again. To this end, however, the work takes a detailed look at all the associated implications, problems and possible objections, and points out the relevance and possible solutions.
The book is addressed not only to academics, actuaries or other employees of insurance companies, but to all those interested in the question of the future design of private health insurance.
The emerging trend is also of great importance for insurance intermediaries. For it is precisely they who must implement and promote the politically desired competition within private health insurance.
If – as can be strongly assumed from the own interest of private health insurance and the actuaries responsible for the calculation – the concepts for the transfer of a risk-adjusted ageing reserve are implemented, healthy insured will in future receive significantly less in the way of ageing reserve when changing insurer, in order to finance the higher transfer value for sick people – their new premiums when changing insurer will therefore rise considerably as a result of the lower transfer value. Therefore, healthy people with the intention to change should not wait too long.
Conversely, sick people should then have better opportunities to switch at a later date – once these concepts or those being worked on by the German Actuarial Association, for example, have been implemented in a comparable way.
The already politically desired competition in private health insurance, also for existing customers, will thus be further improved – intermediaries play an essential role in this, and brokers with a “support obligation” are all the more obliged.
by courtesy ofwww.my-experten.de (expert report 05/2013)
Dr. Johannes Fiala and Actuary Peter A. Schramm
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About the author
PhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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