Standard & Poor's (S&P) has revised its 2002 outlook on the health insurance/managed care industry ...
Standard & Poor's (S&P) has revised its 2002 outlook on the health insurance/managed care industry to negative from stable, due to mounting pressures. It has also revised its outlook on the life insurance industry to stable from negative.
The S&P report, Health Insurance/Managed Care Outlook 2002, said: 'Rising medical costs, the current weak economy and a growing sense of consumerism in health benefit choices are mounting the pressures on the health insurance industry.
The report added that companies which thrive will be those able to price ahead of trend, to control a niche or regional market place, to invest wisely and effectively in technology and to react to changes in the consumer market place.
Derry Andrews, managing director of PMI provider Clinicare, thought the forecast was fairly accurate.
He said: 'The report does not surprise me at all. Over the last 10 years, some of the larger companies have seen some difficult years. It is only the smaller players that have specialised and maintained an equitable level of loss ratio that are doing well.'
However, he is less sure about the report mentioning a growing sense of consumerism. He added: 'Some insurers are offering budget products and saying they are reacting to consumer demand, but most growing consumerism is industry-ed, to try and bring more people into the market.'
S&P's Life Insurance Outlook 2002, says the life insurance industry is expected to follow its 2001 performance trend, which reflected general stability based on strong operating fundamentals.
The report, said: 'Overall strengths include extremely strong capitalisation, very strong business position, strong operating performance, high-quality investment portfolios and the general stability of need and protection-based products.'
Rodney Clark, a director with Standard & Poor's Life Insurance Ratings group and co-author of the report, said: 'We expect that life insurance industry ratings downgrades in 2002 will continue to be driven by a decline in asset quality. Mergers and acquisitions will also continue to affect ratings, mostly favourably, as higher-rated strategic buyers, often from Europe, look to acquire companies that offer distribution and product expertise.'
