Competition in the Irish Private Health Insurance Market

5.33 In this context Vhi Healthcare’s status as a former statutory monopoly
is important. This position allowed it to develop a very strong brand
that was synonymous with health insurance as well as developing
market institutional structures that were specific to Vhi Healthcare. An
example of the latter is the monopsony (single buyer) relationship with
private hospitals, 75 which was obtained when it was a statutory
monopoly.
5.34 BUPA Ireland’s market entry ended Vhi Healthcare’s monopoly and has
slowly eroded Vhi Healthcare’s previous monopolisation of specific
market institutional structures. However, Vhi Healthcare’s strong
position as regards market institutional relationships remains and this
has been referred to in various stakeholder submissions.
5.35 It is likely that Vhi Healthcare’s first mover advantages have
diminished somewhat over time. BUPA Ireland has established its
brand in Ireland. There is considerable public awareness that
alternatives to Vhi Healthcare products exist. However, it is still likely
that many consumers consider Vhi Healthcare products as the market
standard which other PHI firms must emulate.
5.36 In interviews (see paragraph 5.6) a number of possible new entrants
mentioned the level of investment required to create a brand given the
existing strength of the Vhi Healthcare brand. However, this potentially
large advertising spend would depend on the existing business of the
new entrant. Interviewees commented on the successful establishment
of the BUPA Ireland brand. 76
5.37 New entrants may be at a disadvantage if incumbents enjoy first
mover advantages. Some issues related to first mover advantage have
been raised in submissions in the public consultation phase. Some
issues were also raised in Authority interviews with potential new
entrants in 2003.
5.38 There appear to be market constraints on new entrants pertaining to
product design and content. This has two aspects.
• Firstly, many consumers appear to have adopted the basic Vhi
Healthcare products as standards and any alternative health
insurance provider is expected by most consumers to provide at
least the same level of cover as a comparable Vhi Healthcare
product. BUPA Ireland and VIVAS Health do tend to price below Vhi
Healthcare for broadly equivalent PHI plans.
• Secondly, consumer demand appears to require that alternative
health insurers provide at least the same coverage as regards
private hospitals as Vhi Healthcare. The facts of product design and
content appear to support the general thrust of the statements that
Vhi Healthcare has a first mover advantage as regards products.
There are strong similarities between the products of BUPA Ireland
and VIVAS Health and Vhi Healthcare products. They cover almost
75 The operations of the National Treatment Purchase Fund only began in 2002. Before that the only
other purchasers of private secondary healthcare were the restricted membership friendly societies
and a relatively small number of individuals who despite not having health insurance chose to pay for
their treatment in a private hospital.
76 The latest new entrant, VIVAS Health, is in the process of establishing a new mass market brand in
Ireland.
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