Axa in talks to take over clients of Bupa health insurance

International insurance company Axa is in talks with the Government regarding plans to enter the health insurance market as a replacement for Bupa Ireland.

Senior Axa personnel are to meet Minister for Health Mary Harney today on the company's plans.

The Irish Times understands that in recent weeks Axa has been in contact with Bupa Ireland and has expressed interest in taking over its operation here.

Informed sources say this could involve Axa taking on Bupa's membership book and its liabilities as well as employing the company's existing staff.

However it is understood that Bupa has strongly rejected the approaches made by Axa.

A spokesman for Bupa said that the company was not in talks with Axa and would not be entering into talks with Axa.

"Bupa Ireland has carefully considered its market exit approach as outlined to Government and members in recent weeks," he said.

Bupa Ireland, which has 450,000 subscribers, said in December that it was to withdraw from the Irish market following the introduction of a controversial risk equalisation scheme.

Bupa yesterday wrote to 50,000 of its subscribers to say that policies which expire at the end of the month would not be renewed.

Insurance cover for the remaining 400,000 members will terminate as existing policies expire.

Bupa has said that the employment of its 300 staff at Fermoy in Cork and in Dublin is "at risk".

Axa operates in the general and car insurance sector in Ireland. However, the company provides health insurance cover abroad.

A spokesman for Ms Harney confirmed last night that she would be meeting Axa executives today to explore their plans for the Irish market.

The spokesman said Ms Harney was keen to promote competition and would do what she could to facilitate other entrants.

Ms Harney is also to announce shortly the membership of a new business review group to be established to determine whether the health insurance sector, as currently regulated, can be profitable.

Government sources have said that the aim of the new review was to "double check" the position as to whether a return could be made in the Irish market within the environment of community rating and risk equalisation. Bupa has claimed that the operation of risk equalisation - under which it would have to pay tens of millions of euro to rivals such as VHI - has made its business unviable.

Bupa has contended that the absence of many of the large international insurance companies from the Irish health market is evidence of a widespread belief that it is not commercially attractive as a result of the introduction of risk equalisation.

Risk equalisation is effectively a compensation scheme under which insurance companies with relatively older subscribers receive payments from those with younger membership profiles.

The Government believes it is essential to underpin the concept of community rating, where everyone pays the same regardless of age.

The arrival of any new entrant in the health insurance market would be seen as a major coup by the Government, which has come under pressure regarding its plans for the sector following the announcement of Bupa's departure.

Senior Government figures have suggested that the Cabinet may consider breaking up the VHI into a number of competing companies.

This is expected to be one of the main recommendations of a report drawn up by the Competition Authority, to be presented to Ms Harney shortly.

However, the main union representing staff at the VHI, as well as management at the company, have expressed concern at that proposal.

A spokesman for Axa could not be contacted last night.