Mr. Sean Egan:

I thank the Chairman and members for giving us the opportunity to make a presentation to the committee. As copies of our submission have been circulated, I will keep my comments as brief as possible in the interests of time and sustaining people's general interest.

We focus in our paper, as others have done today, on current market developments. The issue of most concern to us is the reduction in numbers taking out private health insurance in the past five years and the fact that this reduction is particularly noticeable in the 20 to 29 year age cohort. Given the relative average claims cost per person of older versus younger claimants, it is clear that having a strong base of younger customers is what sustains the whole system. If we do not have enough younger people coming in to subsidise existing members as they get older and require more medical care, we will see premiums being driven up. That will be a major cause of concern for us in the coming years.

It is important that we work together to ensure the young and healthy continue to take out insurance. That will require insurers to manage their cost bases, as has been mentioned several times today, through internal efficiencies, negotiations with external providers and so on. These are actions we are already taking, as, I am sure, are our competitors. The State can play its role by not imposing other, external costs on insurers in a way that will make it difficult for them to manage their own costs. Whether one is talking about the levy, charges for private designated beds in public hospitals and so on, all have an immediate impact on the cost of insurance.

In regard to risk equalisation, our position is that we have been expecting this legislation for the past three years or so. We are in this market and support the introduction of risk equalisation. We have a genuine desire to work with the Department of Health on this issue, but we need the dialogue to be constant and timely and to see more of it. We have had a useful engagement in recent weeks and some issues have been taken on board, for which we are grateful to the Department. However, we still have concerns about the legislation.

On the question of whether risk equalisation will inevitably lead to an increase in prices, I am not convinced that it will. It is very much a question of getting the detail right and operating to a sensible time line. On the other hand, on being told, with only ten days notice, that one must produce a set of revised plans and so on, I cannot find the right word to express how ridiculous that is. As a responsible company, we have to be able to anticipate what is coming up. The 150% solvency requirement means we will have to put more capital into the business, which might well lead to price increases. The industry has got it wrong on occasion, as we did in the case of the levy increases earlier this year. In that instance, we scrambled to put up prices up for a period to make up for the fact that we did not understand what was happening in the first place. All such issues can be managed by taking the right amount of time to get the legislation right. I am not talking about years - it probably only needs another month or two - but it is vital that we understand what is being proposed and can put it into effect in the products we offer.

The problem of young and healthy people leaving the health insurance market is often described as a vicious circle. If it continues, price rises are inevitable because there will be insufficient numbers to subsidise the older, sicker cohorts. That, in turn, will lead to more people leaving the market, thus putting greater stress on the public system. We must find a way to prevent this cycle. I am somewhat dismayed that some of the focus in discussing the legislation has been on "segmentation", which seems to have become a dirty word. I am not sure what interpretation people are putting on that word, but one segment is 20 to 29 year olds and I intend to focus hard on getting more of them into the market. Every insurer must focus on having a sustainable and affordable business.

Aviva is absolutely committed to the introduction of universal health insurance. We are ready to be engaged with and to work with the Government on the issue. For now, however, our focus is on risk equalisation and understanding and better managing the implications for the market.