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· Posted on
February 21, 2024

Medibank Private increases profits by 40% thanks to AHM

Young Aussies love a no-frills brand, and AHM is paying dividends for Medibank.

What's the key learning?

  • Medibank Private is one of Australia's biggest private health insurers.
  • It bought AHM back in 2009, and re-launched it as a no-frills brand in 2013.
  • Now, Medibank's seen a 3.5% increase in policyholders, and it's thanks to AHM.

Medibank is one of Australia's biggest private health insurers. It's worth a huge $10 billion, and covers around 3.7 million Aussies.

Young Aussies haven't always been big fans of private health insurance companies. To combat this, Medibank bought AHM in 2009. A few years later, they re-launched it as a simplified, no-frills private health brand for the younger gen.

Now, Medibank's seen a 3.5% increase in policyholders - and it's all thanks to AHM. The catch? Because they've attracted so many young users, they need to contribute more cash to the 'risk equalisation pool'. 

So what's the key learning?

Unlike car insurance or life insurance, private health insurance isn't 'risk rated'. This means everyone is entitled to the same health cover, at the same price, regardless of age, sex, race or health status.

With no 'risk ratings', it means that a healthy 20-year old-will pay the same premium as an unwell 60-year-old. The theory is it helps keep healthcare affordable for our ageing population. But it ain't so great for insurers. Because, well, older policyholders = more risks = more costs. Younger policyholder = less risk = less costs.

But in the interests of fairness, private health insurers with lower-risk customers (aka youngins), like AHM, need to contribute more cash to a 'risk equalisation pool'. The funds in the pool then subsidises those private health insurers with older customers. Sharing is caring.

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