How rocketing cost of health cover helped VHI make €56m profit
State-owned health insurer VHI has reported making bumper profits, just weeks after imposing a new price rise on its one million members.
The increase in premiums at the start of this month was the second in the past six months.
The company said it had made a net surplus of €56.4m last year.
This was almost €11m more in profits than the previous year. The company was also able to boost its financial reserves.
The company reported a fall in the cost of its claims paid out, a key factor when determining its pricing.
Total claims paid out in 2016 amounted to €1.34bn, down €40m from the previous year.
Health insurance expert Dermot Goode, of totalhealthcover.ie, said there was a need for VHI to explain why it was hiking its premiums when its claims costs fell last year.
"We need more details from VHI on why it increased rates twice in the last six months when claims costs paid out have gone down," Mr Goode said.
The cumulative rises for families have been between 6pc and 10pc in the last year, he said.
This means a family with two adults and two children will end up paying an extra €250 on a mid-level plan when they renew.
Asked how his company could justify price hikes when its financial results were so good, VHI chief executive John O'Dwyer said the price rise this month was the lowest in the market. He said health insurance was a low profit-margin business, and he held out the prospect that there would be no further rises this year.
"I can't guarantee it, but I am confident that we won't have any more price rises this year," he added.
Mr O'Dwyer told the Irish Independent VHI does not pay a dividend to the Government, and any surplus it makes goes back to customers in the form of lower premiums.
"I want to stress that all the money we make goes back to customers in the form of lower premiums. We have the lowest premium rises in the market."
As well as the premium rises, the company has also benefited from a rise in the health insurance levy, which funds insurers with older customers.
VHI has the lion's share of older customers. The levy ensures older people do not have to pay more for the same level of cover as younger people.
Mr O'Dwyer insisted the levy was not inflating premiums.
Next month, Irish Life Health is to raise its prices by an average of 3.2pc. But some plans will go up by double this amount.
The costs for a family of two adults and two children could increase by between €100 and €250, depending on the Irish Life Health plan held.
Both Laya and VHI have already increased their rates twice in the last six months.
The hikes are despite the fact that all three insurers have been helped by a strong rise in the numbers of people with private health insurance.
The jump has been put down to economic recovery and the introduction two years ago this month of late-entry penalties.
An extra 150,000 people took out health cover in the past two years, said the Health Insurance Authority. More than two million people now have cover.
The largest increase was in the number of people in their 40s taking out policies in the last two years.