People are often understandably skeptical about financial products that are suggested to them. Prior mis-selling of financial products (although mainly on the investment side), destroyed a large amount of trust between consumers and the financial services industry.
Things are changing and the future for getting great financial advice in South Africa is changing for the better (watch this space!).
We’ve done our own fair share of suggesting here at WellSpent, especially on the importance of Gap cover. We’re not shy of our prior articles like: “The insurance you don’t want, but absolutely need”, and “The insurance you (still) don’t want, but (still) absolutely need”. These definitely don’t hide the fact that we think Gap cover is a great product.
Show me the numbers
In case you thought that Gap cover was some clever way for financial services companies to make more money, whilst preying on people’s biggest fear as suggested by the media; ending up in a state hospital, we reached out to one of the bigger Gap cover providers who kindly supplied their claims statistics over the last five, full years.
We wanted to show you a few interesting trends in the Gap marketplace.
Let’s start with the number of claims
You’ll notice a growing number of claims from clients per year. We put this to the increase in the number of Gap clients and growth in the number of people who enter into Gap policies. Sites like ours, and a general increase in awareness around Gap cover, have gone a long way in drawing more and more medical aid members to Gap products.
Likely too, that clients are becoming more aware of their rights to claim under their Gap products, whereas in the past, some opportunities to claim might have slipped through.
Value of claims
The value of total claims growth is massive. This would partly be driven by the growth in the number of clients, and hence more claims in general. This is evidence by the general steady increase in the Rand cost per claim over 2012, 2013, and 2014.
A different story
The years of 2015 and 2016 paint a very different picture though. The average Rand cost per claim starts to pull away from historical trends, meaning that the actual costs of medical care is increasing during this period. For example, customer claims in 2016 dropped by 37%, however total claims value went up by 50%, putting the average Gap cover claim at nearly R11,000, compared to just R3,500 four years earlier.
This is year-on-year growth of about 30%!
So what does this mean?
On the face of it, and without any further info, it means that the costs that medical specialists charge patients has increased by about 30% per year, over the last 4 years.
We know that medical aids have not suddenly dropped their level of coverage and pushed anything on to the Gap cover providers. Medical aids have generally always paid one times medical scheme rates for specialised in-hospital medical costs.
Ours is by no means an in-depth expose on the rising costs of private medical care in South Africa, but the numbers do look persuasive.
The fact that Gap covers exist, and cover the ever-growing shortfall was a reason why the legislation around Gap covers has changed lately. The thinking was that if a member of a Gap policy had their benefits limited to R150,000 per person, per year, they would push back on any high fees charged to them by medical specialists, since their ability to be made whole by their Gap cover was now limited.
We questioned the efficacy of this at the time, because as you can see, the average claim is R11, 000. You’d have to have had a pretty bad year, if you exceed your annual cap.
It may be that medical specialists do take advantage of the fact that patients won’t be out of pocket for their costs, and might even price discriminate between those who have Gap cover and those who don’t; charge those with Gap cover a lot more, and charge bare-bones fess to those on a medical aid.
Either way, specialised medical costs are increasing – BY A LOT.
It’s kind of a vicious cycle; the more people who have Gap cover, the more specialists can charge. The more they charge, the more reason to get Gap cover.
We’re also seeing the fact that medical costs are growing fast, come through in the monthly premiums charged for Gap covers. Most Gap cover providers had notable and out-of-the-ordinary increases for their 2017 benefit year.
This is no doubt to keep their Gap risk in-check given the rising cost of medical costs.
- We think Gap cover is a great product, and this author would personally be prepared to spend a lot more every month on his cover if he ever had to, to keep it in effect.
- Private, specialist, medical costs look to be heading to the moon.
- Gap cover is cheaper than a space suit.