The Commonwealth ombudsman has found insurers are frequently engaging in so-called phoenixing - a loophole-exploiting practice of ending a product, only to replace it with a near-identical service with a much higher price not long after.
Phoenixed - In one case, an insurance premium increased by 21 per cent in the space of a year after it had been phoenixed. If two members of the same fund with essentially the same product are paying prices that might be 20 or more per cent different because of this phoenixing practice, you'd have to describe that as price gouging.
The ombudsman investigation came after consumer group Choice first reported on the practice in February and found some insurers had increased prices by up to 47 per cent over three years. Any private health insurance price increases must be approved by the minister, and while phoenixing isn't illegal, Butler said it was "clearly against the spirit of the law".
It is an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process. The practice was widespread across the entire industry, particularly in relation to "gold" products, which was the only option Australians had to access products like maternity and major surgery cover.
It is an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process. The practice was widespread across the entire industry, particularly in relation to "gold" products, which was the only option Australians had to access products like maternity and major surgery cover.
The government would change the law to make phoenixing illegal, and name and shame insurers, unless the industry stopped the practice. The warning comes after Australia's 29 private health insurers submitted their price increase proposals for next year in November.
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