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Medical costs in the United States are notoriously expensive, and the uninsured regularly get themselves in debt reaching hundreds of thousands of dollars – if not into the millions.
When it comes to New Zealanders travelling to the US, travel insurance is an absolute must. However, according to Allianz Partners, US travel insurance is becoming increasingly difficult to price and sustain – especially when the rate of claims vastly surpasses premium income.
“US costs has been an issue for a long time,” chief underwriting officer Eftim Stojanov told Insurance Business.
“Weather events are a reinsurance game; an increase in events will lead to an increase in reinsurance premiums, and consequentially, those costs will be forwarded to the customer. With medicare in the United States, insurance companies and the medical industry can no longer get the same kind of rent from the public. Medical providers in the US are managed like private businesses, and travel insurance has been hit heavily as a result.”
Stojanov says medical providers in the US are managed primarily as profit-making businesses, and, due to increased regulation, it has become increasingly difficult for them to extract the profits that they have in the past. Travel insurers have therefore become a target, and have been seen as an additional source of revenue.
“We currently have a claim of roughly US$1.3 million,” Stojanov said. “These costs are abnormally high, and this points to the fact that these hospitals are run like businesses. These discrepancies are very hard to manage from an insurance perspective, and, even if we get reinsurance for large losses, your reinsurance premiums will still increase.
“It gets to a point where travelling to the US will become so expensive from an insurance perspective that people will have to think about whether or not it’s worth it. We have an ageing population together with rising costs, more pre-existing conditions, etc. and travelling to the US will become less and less affordable.
“We also deal with travel providers, and a lot of these costs would be unacceptable to them – so it also becomes an issue of business relationships. We have to be considerate of our customers, and we have to understand the demographic situation in New Zealand, and unfortunately rely a little on cross-subsidisation to keep the costs affordable.”
