ANALYSIS:Rather than being dead weight, older people may well bolster the brand with their loyalty, writes Laura Slattery.
VHI'S OLDER customer base was portrayed as the health insurer's liability this week, as the Supreme Court threw out the Government's risk-equalisation scheme.
Its ageing members, the legacy of being the only player in the market prior to 1997, will steadily become sicker and sicker, pushing the VHI and its customers into a spiral of increasing claims costs and rising premiums.
But older members could also be the VHI's saviours - as long as the company can achieve the vital step of securing an insurance licence from the Financial Regulator.
With such a licence, risk-rated products such as the VHI pension, the VHI nursing homecare policy and the VHI income protection policy could eventually hit the market. The "older and chronically ill members of society" that the VHI says are the victims of the Supreme Court's ruling become potential generators rather than drainers of revenue.
But the insurer applied for the licence in June in the expectation that risk-equalisation compensation payments from its rivals would improve its solvency ratio closer to the 40 per cent level required by the regulator.
Yesterday, the insurer said it was examining "various" sources of funding in its pursuit of the insurance licence, which it said would continue in the same way as it did prior to the Supreme Court setback.
The authorisation process, expected to last six months, is ongoing, and the licence is still on track to be secured by the end of the year, a VHI spokeswoman said.
"While risk-equalisation receipts would obviously have improved our solvency situation, we are looking at various other sources of funding, including, but not limited to, reinsurance."
Reinsurance, which would involve the company selling on some of its risk to other insurers, is the most likely means by which VHI will try to satisfy the regulator.
It is unclear what alternative sources of funding could boost its reserves, but the spokeswoman again ruled out seeking extra State capital to do the job.
Risk-equalisation payments would have increased its solvency ratio from 35 per cent to 38.7 per cent and brought the VHI one step closer to the "greater financial freedom" that the licence will give the company. In that context, it is not surprising that its rivals considered the scheme to be little more than a subsidy to the VHI.
The VHI's size - it is the dominant player in the health insurance market, with a 70 per cent market share - may ease any fears the regulator has about its solvency position. The loss of the risk-equalisation payments - a sum of €41 million for 2006 and 2007 - is slight compared to its annual €1 billion intake in premium income.
But with Quinn Healthcare and Hibernian Health both undercutting VHI on the price of their main hospital plans, young adults buying health insurance in their own right for the first time are reluctant to sign up to the brand so revered by previous generations.
It is loyal elderly members who could prove the more reliable sources of income for the VHI - just as long as it gets into fit-enough financial shape in time to get its insurance licence lifeline, and just as long as indirect threats of premium hikes don't spark a panicky exodus in the meantime.
