Medibank Earnings: Trend of Members Flocking to the Cheapest Offer Expected to Slow

With household cost-of-living pressures mounting, there is a risk that participation in private health insurance will fall, but so far numbers have been resilient at five-year highs; 45.2% of the population is currently covered. Policy switching with signup offers, like first six weeks free and gift cards, probably reflects some increasing customer price sensitivity. This is likely more so for younger customers buying policies to avoid paying additional tax and not fussed about the actual inclusions. This is hurting narrow-moat Medibank’s policyholder growth. Medibank increased policyholders below our expectations, as it did not match what it views as unprofitable offers in the aggregator channel. We think Medibank can grow slightly ahead of the market over the medium term. We think smaller and less profitable private health insurers are unlikely to maintain current offers as claims rise on an aging population. Also, Medibank continues to improve its value proposition by expanding providers and procedures where members pay no gap. This should help differentiate the offering and lift customer satisfaction, a positive for client retention and new customer wins.