Protection in Numbers  

Vitality Health blasts no claims discount as 'misnomer'

Vitality Health blasts no claims discount as 'misnomer'

VitalityHealth has blasted the phrase 'no claims discount' as misnomer, saying it is a penalty on insurance customers who have made a legitimate claim.

Neville Koopowitz, chief executive of Vitality, said there was not enough transparency around terminology and the way insurance policies can be structured.

He said: "The no claims discount is a misnomer; it is more of a claims penalty. Sharp increases often follow even small claims, which negates the insurance cornerstone of collective risk sharing."

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His comments came as VitalityHealth announced it will change its renewal pricing approach for individual healthcare policies within the guidance of a new Fair, Intuitive and Transparent (FIT) framework. 

According to Mr Koopowitz, while the industry-standard no claims discount (NCD) rating structure is opaque and can produce volatile premiums on renewal, the FIT framework will ensure a fairer, more intuitive and more transparent pricing approach for VitalityHealth members.

Under this approach, renewal premiums will be based on an ‘ABC’ model. This will take into account increasing age, the base medical inflation rate and a new claims and wellness engagement measure. 

By including wellness engagement in the determination of private medical insurance renewal premiums, Mr Koopowitz said VitalityHealth was entrenching its shared value insurance model, which rewards members for taking positive steps to improve their health. 

He said: “These changes are ahead of the market and go beyond the regulatory requirements around premium transparency to be enforced from April 2017.

“Additionally, the current NCD structures can be confusing. For example, people may believe that a movement from 65 per cent to 55 per cent on the NCD scale equates to a 10 per cent premium increase, when in reality this equates to a nearly 30 per cent premium increase.

"This excludes the effects of age and inflation. We believe that no customer should ever be surprised when they get their VitalityHealth renewal, which is why we have introduced this new framework.”