Competition in the Irish Private Health Insurance Market

elevant regulatory requirements, expansion does not require the
opening of new branches around the country. Provided that databases,
claims processing and premium renewal systems and call centres are
not constrained in terms of the number of transactions they can deal
with, expansion in membership numbers does not appear to require
any major additional resources. No significant capital expenditure is
required.
8.46 In its ten years in the market, BUPA Ireland has grown its membership
base to 459,000 members, or 22% of the market. Over the same time
period, Vhi Healthcare has grown its membership by about 137,000. In
the last five years, BUPA Ireland’s membership has increased by an
average of about 51,700 members p.a. Over a five year period
(between September 2001 to September 2006), BUPA Ireland doubled
its membership base from around 223,000 to 459,000 members. BUPA
Ireland’s success in building its market share would indicate that there
were no major barriers to expansion in the market at this time. Indeed
BUPA Ireland itself acknowledged that it had a “rapidly growing
business.” 161
8.47 In the case of VIVAS Health, within one year of entry, it had attracted
20,000 members, and a further 38,000 in its second year. Again this
seems to indicate that there are no significant barriers to expansion in
this market. In the health insurance market, we would not expect a
new entrant to see rapid growth in its market share immediately. This
is because branding and trust are very important in this market so a
new entrant will need time to build up its reputation.
8.48 There are, however, two factors, which as well as making entry more
difficult could also make it harder for firms in the market to expand
their market shares and hence, their competitive impact.
• Firstly, levels of switching in the market are low partly due to
inertia, high search costs and certain strategic behaviour by Vhi
Healthcare such as tying its health and travel insurance products.
• Secondly, a number of submissions highlighted the difficulty of
establishing work-based group schemes which involve a salary
deduction facility for employees because of difficulties in
convincing work-based group schemes to offer their employees
who pay their PHI premiums via salary deduction a choice of PHI
provider. New entrants may find it more difficult to access this
distribution mechanism and may limit their growth.
8.49 Although these factors exist, on the whole, it appears that barriers to
expansion are low in the PHI market. If a company overcomes the
barriers to entry which exist as BUPA Ireland and VIVAS Health did,
the remaining factors which affect their ability to grow are not very
significant. BUPA Ireland achieved a 22% market share (over 450,000
members) in nine years and saw itself as having a “rapidly growing
business”. VIVAS Health has gained 57,700 new members in two years
in the market.
161 Source: BUPA Affidavit.
128