Will Quinn succeed where Bupa failed over REPs?

The white knight that rode in to save Bupa Ireland's private medical insurance customers took many people by surprise last week.

Quinn Group's decision to enter the market has been discussed at great length in Ireland, not least because of its initial promise to freeze prices for 2007 and its competitive track record in the other insurance markets, which it has previously entered.

Already there is talk - denied by Quinn - that it is only in for a short-term ride to make a quick buck and then bow out when the risk equalisation payments kick in in three years.

REPs have been subject to a long-held battle between Bupa and the Irish Government and are essentially the key reason why the healthcare giant has decided to turn its back on the Emerald Isle.

These were introduced when the former state-run private health care market was opened up because the state-run insurer, VHI, feared that given the size and elder profile of its customer base, its claims record would mean that it could not compete with new entrants.

However, as a compromise, new entrants were granted a three-year period of grace, exempting them from making payments, so they could get themselves established in the market.

Fierce government criticism

But this has not saved the Irish government from repeated criticism for a decade now. In 1998, a Bupa spokesman told Post: "Why should Bupa Ireland, with just over 70,000 members, be required by law to pay millions of pounds over to its competitor, the VHI, which has 1.5 million members? This does not make commercial sense."

On exiting Ireland last week, Bupa managing director, Fergus Kee - despite Bupa's market share increasing to over 20% (475,000 policyholders) - indicated that not too much progress had been made with the regulators: "We regret being forced out due to the scale of the risk equalisation charges that were accruing, but we are very pleased that this agreement with the Quinn Group will preserve competition, choice and continue the range of benefits available to Bupa Ireland members."

Maybe Bupa had become tired of banging the drum almost alone and has passed on the drum sticks to Quinn in the hope that, given the firm's stature in Ireland, and its progress in other markets such as motor insurance, it may be able to make enough of a racket to bring about the change it longed to facilitate.

Indeed, Quinn chairman Sean Quinn has already dropped hints that it will be trying to shift the current status quo: "In all of our businesses, we operate in an open and competitive environment and we trust that the report of the review group established by the Minister for Health, Mary Harney TD, and other initiatives, will lead to a more open and competitive landscape in this market."

And, if Quinn is successful in bringing about change, it would be no surprise to see Bupa return.

Agree/disagree: e-mail jonathan.swift@incisivemedia.com.