Online, but still opaque
Look harder at those transitional conditions, they are tougher than you think

Product creep should be named as a source of medical inflation

Aon’s 2020 Global Medical Trend Rates Report shows that the global average medical trend rate – the percentage change in medical plan costs – is 8 percent, compared to the average general inflation rate worldwide is projected to be 3.1 percent. Click here to read more. They blame bad habits, rising drug prices, and ageing populations for driving health care costs higher. Of course, these things are real. Bad habits definitely play a part. We also seem to have forgotten the importance of getting vaccinated. But inflation is a tricky beast to pin down. At a conceptual level, it is the rise in price solely due to increase in money supply with no corresponding improvement in value. Yet value in healthcare is improving - after all, lifespans are lengthening, and measurements like disability adjusted life years are generally positive. 

Equally, the health insurance of today is not exactly the same as the health insurance of, say, five years ago. It isn't even very close to the health insurance ten years ago. If I compare - and I can - the most popular product of today with the most popular product of that time there is a considerable change - and that change has been to the customer's benefit, but also comes with a cost.

A common product cycle, therefore, is to gradually see incremental improvements until the product has migrated out of its segment. When that happens, a new product must be launched to replace it. Take the Honda Civic. Once upon a time this was a tiny hatchback. It has grown and grown, literally, the first generation measured 3550mm in length and weighed 680 Kgs. For the tenth version those measurements are 4519mm in length and a minimum of 1277 kgs, although it is frequently heavier. These cars have the same name, but they are very different. 

The same goes for insurance product. Wherever you look, mortgage protection, income protection, trauma insurance, and especially medical insurance, there has been incredible change. 

Car manufacturers realise what happens with product creep, and sooner or later they respond to it. Honda has a new small hatchback in its range to replace the spot vacated by the Civic. It isn't the same and the original Civic, and no-one would want it to be. But it is a new offer to the same segment. That often needs to happen. 

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