Assurance for choosing the right health insurance? What is a healthy price to pay and how to select it?

Pricing is perhaps the most important and influential element of the marketing mix that a consumer uses when making a choice on which product to buy. Iacobucci (2014) concurs arguing that price is more important than the other three ‘P’s’ in the marketing mix because it can most easily be assessed and analysed by consumers.  Equally the pricing of a product is just as important to an organisation offering a product or service to the market.

With so many choices available to us in this day and age of the internet and information at our fingertips it is easy to feel overwhelmed with, dare I say it, too much choice. We have to cut our options down to only a handful to choose between. So I, like most people put a lot of consideration into the price of a product or service in comparison to the gain I will receive when I make a decision.

Yet, when considering price, more often than not it isn’t as easy as looking at the price of the product or service, considering the value of it and making a decision. Instead, according to Homburg et al (2014) consumers frequently have to add additional charges or fees to a base price, consider advertised or promotional deductions or include the cost of extras when calculating the final process.

Before we get to my price dilemma, how do companies set prices for their products or services? First of all companies need to ensure they break-even, Iacobucci (2014) suggests that a simple explanation for this is how many units of a product/service do companies need to sell to make back their costs? Setting prices can be tricky, if the price of a certain product is too high, consumers will possibly opt for another, but if the price is too low, a company may not break even, or worse not make enough money to cover the cost of providing that product or service!

What considerations do health insurance organisations make when devising their price plan? In the case of private health insurers, it seems that many wish to increase their market share which Quester et al (2004) suggesting that many organisation choose this objective if they want long term success. This is a strategy that The Australian (2016) suggests Medibank is following – already the leader in market share at 30%, it is seeking to increase this share through marketing campaigns and offering lower prices for its services. Other health insurers try to increase their market share by attracting customers by offering them something in return. Some offers waive waiting periods for specific services, and others reward new customers with gift cards.

Source: NIB (2016)

Source: NIB (2016)

Source: HCF (2016)

Source: HCF (2016)

However, in between all these pricing strategies, the Australian government sets a suggested price increase each year, urging all insurers to increase their services to their suggested percentage increase each April – but as this is not strictly mandated, many insurers raise their fees over the recommended rate according to ABC News (2016).

Recently I found myself in a dilemma when it came to health insurance.  Do I stay with my current health insurer, or do I change to one that is cheaper but still offers me the same level of cover and service? After some serious investigating, this is what I found – health insurance providers have become increasingly competitive when it comes to signing up new clients, and keeping existing clients from moving across to another insurer. Their main strategy when doing this? Price – setting prices for their policies that appear to be cheap and comprehensive.

Sure, initially these insurance policies appear to be a bargain and they did catch my attention. I was finding myself thinking “I’m paying how much (?!) when this provider is offering what appears to be comparative insurance for a lower price”. But then I click the ‘view more details’ button and I soon see that this wonderful, cheap price only covers me for the bare basics. If I want optical included (and yes I do, because I wear glasses) I have to upgrade to the medium extras policy for an additional $X per month.  And while there are many websites that prepare comparisons for you, they don’t necessarily help to decipher the pricing plan.

So do complex pricing strategies, like the ones health insurers often use work? Or do they drive potential customers, such as myself away? I found that once I started reviewing my options I got confused, very confused. Sure a voucher is great but is physiotherapy covered in basic extras or did I need to pay more for that service? Will a waived waiting period be for the service I use most? Will the increase in fee come April 1 mean I am paying as much or more than I am now?

I think insurance should cover headache treatments from trying to decipher options!

By egrigori85


HCF (2016) (accessed 28 April 2016)

Homburg, C., Totzek, D. and Kramer, M. (2014) How price complexity takes its toll, Journal of Business Research, vol. 67, no. 6, pp. 1114-1122.

Iacobucci, D (2014) Marketing Management (MM4), South-Western, Cengage Learning, Mason.

NIB (2016) (accessed 27 April 2016)

Quester, P. G, McGuiggan, R. L, Perreault, W. D and McCarthy, E. J (2004) Marketing: Creating and delivering value, fourth edition, McGraw-Hill Australia Pty Ltd.

Roddan, M (2016) Medibank could spark a price war: analysts, The Australian, 25 January.

Scott, S (2016) Private health insurance premiums to jump from April as Australians raise price concerns, ABC News, 2 March.

Youtube (2016)


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s