Yuriy Nikanyonok  

Life in the Ukraine: Health Insurance Cost vs. Currency Depreciation

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It’s no secret that recently numerous developments in political and economic spheres brought about changes into the life of whole country. If we compare ordinary people’s welfare last year to life in Ukraine 2015 and projected life in Ukraine 2016, there will be an obvious and major change, namely – the impact of depreciation of hryvna against US dollar. Sky-rocketed prices made a great number of people reconsider their expenses, including the amount of money that was normally spent on insurance.

As to the insurance industry, it’s safe to stress out that health insurance segment suffered the most in this regard.

Prices for pharmaceuticals surged which subsequently resulted in the insurance companies adding the so called “currency clauses” to their health insurance policies which stipulated the correlation between insurance rates and the exchange rate fluctuations.

Statistics show that insurers’ expenses on managing their health policies portfolios nearly doubled in the course of last year. With the prices for medical institutions services also going up, the loss ratio of the majority of the insurers exceeded 100 %. This figure is relevant not only to those which used damping prices to attract clients, but to the reputable insurers as well. The reason behind it is not an underwriter’s mistake or error in the pricing strategy, but a result of the economic situation in the whole country lowering the level of life in Ukraine 2015 with consequent negative effects on life in Ukraine 2016.

Let’s look closely at the “currency clauses” in the insurance policies to see what the available options to minimize the insured’s expenses are. It’s a common practice to stipulate the insurance rate revision if the Ukrainian currency depreciates by more than 10 %. Once you’ve found yourself in a situation when your insurer asks for additional premium under “currency clause” of your current policy, here is what you can do.

1) Find out about the current loss ratio on your policy.

2) Ask for several options for additional premium payment and possible changes to the program

3) Compare the prices for the amended program provided by a couple of other insurance companies to the one offered by your current insurance partner

4) Make a rational decision.

Besides keep it in mind that if your policy has minimal loss ratio, it’s reasonable to negotiate with the insurer to increase the insurance rate later, once this ratio reaches a certain level you both agreed on.
Besides keep it in mind that if your policy has minimal loss ratio, it’s reasonable to negotiate with the insurer to increase the insurance rate later, once this ratio reaches a certain level you both agreed on. It’s also recommended that you insist on paying additionally only for the period that is left till the ending date of the policy term.

As to concluding new insurance policies, here are several aspects worth keeping in mind:

1) Find out beforehand which portion of the insurance premium is subject to adjustment under “currency clause”.

2) Set the benchmark for loss ration triggering the revision of the insurance rate.

3) Define the exact number of revisions allowed during the term of the policy.

4) Provide for the inclusion of the amendments options available for your program in case of the rate revision.

5) Stipulate the sufficient time frame for negotiating terms in case of the rate revision.

6) Provide for the partial return of the insurance premium if the agreement on the rate revision is not reached.

Taking into consideration life in the Ukraine under current economic instability it’s wise to always keep in mind that in vast majority of cases the revision of the insurance rate by the insurers is an undesirable, but vitally necessary measure keeping the insurance company afloat to live up to their clients expectations and fulfill all the obligations in terms of indemnity.

Our hope is that soon we will all see some positive developments in the Ukrainian insurance market.

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