VHI dominance protected by Govt - Vivas

The Government is protecting the dominant position of VHI in the Irish health insurance market rather than fostering competition, it was claimed today.

New entrant Vivas Health told the Oireachtas Health Committee that a survey it carried out in 16 countries found that Ireland had the least competitive market.

The firm is objecting to the introduction of the risk equalisation scheme which would force health insurers like Vivas and Bupa to pay subsidies to the VHI which has older, costlier members.

Vivas chief executive Oliver Tattan, who was previously CEO of the VHI, today said risk equalisation will increase premiums for all consumers, stifle product innovations and consolidate the VHI’s market dominance in the sector.

He said that state companies in other sectors like electricity, gas, transport and telecommunications had specific competition mandates.

“Yet none was ever introduced for health insurance,” he said.

“It appears that Government policy has sought to protect VHI’s market dominance rather than foster competition.”

VHI has currently a larger market share larger than the ESB and its six competitors, he said.

Mr Tattan said a Vivas survey of 16 countries found Ireland had the least competitive market and had only three operators compared to 26 in Australia.

Vivas, which is backed by financier Dermot Desmond, entered the Irish market a year ago and has a small percentage of customers.

Health Minister Mary Harney is to make a final decision on risk equalisation in the New Year after receiving advice from the Health Insurance Authority.

Committee chairman John Moloney said today: “We want to ensure that competition exists for consumers and a fair and level playing field exists for the suppliers of services.”

Mr Tattan noted that VHI announced last week that it intended reducing its financial reserves from 40% to 20% to reduce overheads.

“If we were to make a public statement like that at Vivas Health, I believe the Financial Regulator would immediately take away our licence to act as an insurance company,” Mr Tattan told committee members.

He also complained that the VHI is also allowed to sell travel insurance “in a manner not permissible to any other non-life insurance undertaking in the EU“.

He called on the committee to invite submissions from European health insurers who have not yet entered the Irish market.

He said firms like AIG, Axa, Norwich Union, Alliance and Friends First all sold health insurance outside Ireland and were selling other insurance products in Ireland.

“These firms have the expertise, knowledge and resources as well as the authorisation of the Financial Regulator to enter the market.

“They would not enter because of the restrictive regulatory environment, with the threat of risk equalisation and without a policy to reduce VHI’s dominance.”

Progressive Democrats TD Fiona O’Malley agreed: “Why is Ireland so badly served by other health insurers?”