Why We Keep Paying Without Question
The cost of living crisis is putting pressure on household budgets from every direction, and private health insurance premiums have joined the list. From April 1, average premiums rose by 4.41%, with some gold cover policies increasing by up to 25%.
Many people simply absorb these increases without question. Others consider cancelling their policy altogether. But there is another option: negotiating a better deal with your insurance company.
The Psychology Behind Inaction
Human behaviour explains why so many renew their health insurance without changing cover or negotiating.
Loss aversion plays a significant role. We are psychologically fearful of removing items from our existing cover, even if we replace them with something else. The risk of making the wrong change prevents us from taking any action at all.
Health insurance policies are also complex documents we struggle to understand. This contributes to what economists call bounded rationality — we choose what to do based on simplified rules rather than deep analysis.
Then there are the multiple options available, often requiring significant legal and health literacy to make sense of. Once we make a decision, we rarely revisit it. This is status quo bias in action.
Why Cancelling Comes With Risks
If negotiating with your existing insurer or finding another option sounds too difficult, cancelling may seem appealing. However, cancelling can come with several penalties.
Medicare Levy Surcharge
If you cancel hospital cover, you may face the Medicare Levy Surcharge — up to 1.5% of your income.
Lifetime Health Cover Loading
If you cancel now and return later, you may need to pay the Lifetime Health Cover loading. This adds 2% to your premium for every year you are aged over 30, and this penalty lasts a decade.
Waiting Periods
If you cancel and then wish to rejoin, you will also have to serve waiting periods for certain conditions.
5 Expert Tips to Negotiate a Better Deal
1. Optimise Your Excess, Cover and Extras
Would you accept a higher excess? This is the amount you pay before the policy pays out on a claim. A higher excess means a cheaper premium.
You can also reconsider the level of cover for hospital and extras — these do not have to be the same. For example, you can have basic hospital cover with top-level extras cover.
Review what extras you actually use. Remove those you do not need and save money.
2. Know What You Need
Many people set up their plan in early adulthood and never review it over time. Our medical needs change, and you could be paying for things you no longer need.
If you have no children, why pay for paediatric care? You can add this later if necessary. Similarly, remember to add and remove people from your policy as your household changes.
3. Find a Better Deal to Bargain With
It is important to know the cost of competitors' premiums for similar policies. Use comparison sites to find comparable products to use as bargaining tools with your current provider.
Be prepared to answer questions about whether this product is truly comparable.
4. Ask What They Will Offer to Keep You
Do not be afraid to ask what deals and promotions your existing health insurer can offer to retain your business.
5. Strike at the Right Moment
Review your policy annually. This is the best time to negotiate — right after annual price increases.
It is when providers are most willing to negotiate and when switching deals tend to be most generous.
Before You Switch
Before switching, take time to read the new policy and compare it to your old one. Watch out for differences in waiting times and cover for pre-existing conditions. Check reviews for providers about their customer support and service.
You can contact the Commonwealth Ombudsman for free, general advice on private health insurance, including comparing policies.
