IMLIW 001

Medibank – The Challenge

In December 2013, one year before its IPO in November 2014, Medibank Private was the leading light of the Private Health Insurance industry and clearly dominated the market.
The latest results from arnold&bolingbroke’s PHIBIS* database suggest that Medibank is under competitive pressure with an accelerating downward trend in some key marketing indices, including brand awareness, consideration and fund of first choice.
Medibank is now in danger of being overtaken by Bupa, the second-largest player in Australia.

Background

Industry figures from PHIAC1 show that for the financial year 2012/2013 Medibank had a total market share in Australia of 29.5% (1,803,683 policies) compared to Bupa with 26.8% (1,638,919 policies).

NSW is Australia’s largest market accounting for 32.6% of private health insurance policies across the country. For the 12 months to June 2013, Medibank had a 25.2% market share in NSW compared to Bupa with 24.3%.

APRA has not yet released industry figures for the 2014/2015 year so we are unable to analyse growth rates in overall policies year on year.

Our research suggests that Bupa has continued to grow at the expense of Medibank with the trend away from Medibank intensifying in NSW.

Results from arnold&bolingbroke’s PHIBIS database

Three separate metrics suggest that the Medibank brand could be losing its way:

  1. Spontaneous Brand Awareness.

    This is the key metric by which we analyse “brand visibility”, the ability for a brand to reside in consumers’ minds and the first one(s) they will potentially turn to if/when they decide to take up private health insurance or switch brands.
    In December 2015 Bupa was almost on par with Medibank in NSW in terms of spontaneous brand awareness. A difference of 16 points in December 2013 has reduced to 2 points in December 2015.

    IMLIW 002
  2. Consideration

    Brand consideration generally measures the brand set that consumers are considering if they were thinking of taking out private health insurance or switching companies.
    Until recently, Medibank Private was consistently the health insurance fund with the strongest consideration scores in the market place. During the last quarter of 2015 we have seen Bupa take over this lead and they are now showing a consistently better score for consideration.

    IMLIW 003
  3. Fund of First Choice

    This measures the “future potential” of the brand by establishing the one fund that consumers would choose first above all others. It reflects the market conditions today and is effectively a predictor of market share.
    Our results show that October 2014 was a pivotal moment where Bupa overtook Medibank and took a strong lead in terms of the fund of first choice in NSW and they have continued to dominate Medibank since this time. The gap between Medibank and Bupa is as large as it has ever been since Nov 2015. Since April 2013, Bupa has continued an upward trend.

    IMLIW 004

So, what’s the trouble?

When examining the PHIBIS database and using arnold&bolingbroke’s Qverb analysis of open-ended responses from consumers who have private health insurance or are considering getting it, we come to the following conclusions:

IMLIW 005

  1. Reasons endemic to Private Health Insurance.
    Medibank’s current position can partially be explained by negative perceptions of private health insurance in general.
    Consumers tell us that private health insurance is expensive, that premiums keep going up year after year at more than the increase in inflation, that their out of pocket costs are increasing, that they are getting back less every year and that the funds provide poor cover for what it costs.
    As the market leader in the industry, Medibank is showing a greater loss in this area than a relative “newcomer” such as Bupa.
    IMLIW 006
  2. It’s a matter of Trust, Optimism and Price (TOPs)
    Medibank is still seen as a large, well established, reliable and trustworthy company. In late 2015/ early 2016 our results show that it still leads the field on perceptions of “trust” and “experts in private health insurance”.
    However, the Bupa brand has been steadily improving on these attributes and is seen to be more optimistic as a brand. Medibank’s lead over Bupa of 8 points in December 2013 on “a brand you trust more than others” has reduced to 2 points in December 2015.
    In summary, Medibank remains the leader on “trust”, albeit by a small margin.
  3. Customer service is slipping
    Medibank is no longer seen as a leader in customer service.
    In 2013, Medibank was leading the market in consumer perceptions of being “easy to deal with” (3 points ahead of Bupa) and offering “health cover that you can adjust according to your changing needs” (1 point ahead of Bupa).
    By December 2015 Bupa had jumped to the head of the pack on customer service
    – 2 points ahead of Medibank on being “easy to deal with” and 2 points ahead on offering
    “health cover that you can adjust according to your changing needs”.
  4. It’s all about the money
    Our results show that Medibank is seen currently as expensive, having rising premiums and offering poor value for money.
    Household budgets are under pressure and consumers are becoming more and more sensitive to the personal value that they get out of their health insurer. Comparison sites such iSelect and CompareTheMarket are becoming the norm and more often used in the search for health insurance value.
    Analysis of trends in the PHIBIS database suggest that the real battleground has shifted to relative perceptions of “price” and “value for money” with Medibank’s position having worsened considerably over the last two years.
    In December 2015, Medibank is 5 points behind Bupa on “offers the best value for money” and 6 points ahead of Bupa on “is more expensive than other insurance companies”.
    Being a listed company has meant that consumers are now twice as likely to perceive Medibank as a company that is “profit focused” and “expensive, with rising premiums” compared to Bupa.

In their own words

A number of consumers question the financial motivation of the company and its executives in their search for profit and shareholder dividends.
This is typified by the following off the cuff remarks about Medibank:
IMLIW 007

“Medibank Private was for the Australian people, after the Abbott government sold it for a quick profit to Abbott’s corporate mates…
Medibank Private is now to pay the CEO and top management ‘over the top’ salaries & bonus payments and to pay the shareholders dividends…”
The members & patients care come last now not first, as already seen by the Calvary (Hospital) changing what they will now pay for .. and this is just the beginning! : ( “

Frank Smithers, Principal at arnold&bolingbroke commented …“health insurance is a dynamic market on the move and becoming more highly contested.
Consumers are feeling more empowered and contemplating alternative providers through comparators such as CompareTheMarket and iSelect who are further agitating the market much to the annoyance of the larger players.

Price and value for money are all important with many people telling us that they expect something out of their health insurance as a return on the investment that they are making.
Our TOPS indices (Trust, Optimism and Price) show that Bupa has gained considerable momentum and is increasingly seen as an ‘optimistic’ brand by its members and the broader public. “Finding a healthier you” has been a highly successful campaign for an extended period – it jolted the health insurance market and tapped deeply into the motivations, drivers and psyche of the general population. Medibank needs to find a healthier version of itself through a clever re-invention of the core brand proposition delivered through some more compelling advertising. The new advertising campaign “I am better” offers an interesting and refreshing start. Will this be enough to stop the brand losing its way?”

For more information please contact us at
Email: [email protected]
Phone: 02 8227 5400
Website: www.arnoldbolingbroke.com.au

*Note: PHIBIS (Private Health Insurance Business Information System) is a large, continuous research platform conducted by arnold&bolingbroke where 20,000 Australians per annum are screened to ask about their private health insurance opinion, take up or consideration.
It is a consolidated database that brings together in one place brand measurement, consideration, competitor information, NPS and advertising effectiveness for diagnosis, insight and recommendation. It is supplemented with secondary data sources such as consumer confidence indexes, retail sales, changes in interest rates where appropriate, etc.

1The Private Health Insurance Administration Council (PHIAC) was previously responsible for the prudential and administrative regulation of the private health insurance industry. Commencing July 1, 2015 this was transferred to the Australian Prudential Regulation Authority (APRA).