The government is opening the way for increases to insurance premiums in health contracts by submitting a regulation that creates better conditions concerning the sale of Ethniki Insurance, currently in its final stretch.
With an amendment to the law on consumer protection (Law 2251/1994), which was included in the bill for the new debt settlement framework, the Ministry of Development allows insurance companies to increase the premiums on existing long-term health contracts.
This has been a hot issue in the insurance market, especially in recent years. Many insurers, seeing health insurance contracts become heavily loss-making, and in particular those that offered rich coverage, proceeded to increase premiums that were not related to objective factors known to their customers. Repeatedly, in many companies, the Secretary-General of Commerce had imposed fines for such practices.
But now the government has given the green light for such premium increases. The amendment tabled provides companies the option to impose increases without linking them to objective factors, with the sole condition that they must inform the customer at least 60 days before the increases are imposed.
Next, the insured person does not have many options based on the proposed arrangement: either he will accept the premium increase and continue to pay the new amount, or he will terminate the contract, losing his coverage. The proposed regulation has a retroactive effect, applying to long-term health insurance contracts that have been drawn up before the amendment.
According to experts in the insurance market, with this regulation, insurance companies will be able to proceed, without legal problems with a major "clearing out" of health portfolios, imposing increases to prevent contracts from being loss-making. Even if the insured person chooses to terminate the contract, this will not hurt the companies as it will be able to get rid of loss-making contracts.
Lawyer Giannis Kyriakopoulos, who is aware of the issues of private insurance, points out that the proposed regulation is contrary to the spirit of European consumer protection legislation. As he emphasizes, "the aim of the regulation is the prior legalization of arbitrary premium increases and adverse changes to the terms of the contract."
Regarding the possibility of the consumer terminating the contract, he notes that "it is completely a pretence, as time always flows to the detriment of the insured person. " And he wonders: "What will he do after 15 years of paying premiums? Will his health suddenly change for the better? Will he be able to do a pre-insurance check again in another insurance company, if he terminates the previous contract that will find him healthier 15 years later? It is absolutely certain that the insured person will do nothing. He will continue to pay, if and as long as he can afford it. While the insurance company will not risk accepting fines, such as those imposed in the past and were quite high."
Sale of Ethniki Insurance
Although all companies in the industry are expected to benefit from the regulation on premium adjustments, the amendment may have a direct impact on the most talked about deal at this time. The amendment is submitted just ahead of a decision from National Bank for the sale of 80% in Ethniki Insurance, the largest company in the sector.
The sale process of Ethniki Insurance, owned by National Bank, has turned into a saga as of October last year with the lender expected to decide in coming weeks on whether to accept a buyout offer from CVC fund.
The big obstacle to the deal is the offered price of 450 million euros, according to sources, which corresponds to less than half of the insurance company’s equity.
The amendment that changes the rules of the game in the health sector may allow, according to market officials, an improved valuation of Ethniki Insurance, given that the company has the most health coverage programs and has continued in recent years to offer generous coverage when other companies in the industry have pursued more austerity policies.
According to market executives, the government's push to incorporate the premium amendment through parliament may be an attempt to help close the sale at possibly a higher price.