Madam, - Vincent Sheridan, CEO of the VHI, tells us to beware of "myths and misinformation about risk equalisation" (Opinion & Analysis, January 16th.)
Maybe. But one thing is crystal clear: he also has to address the hard sums on which his assertions are based.
As the State-owned and dominant private health insurer (1,560,000 customers) the VHI has a prudential responsibility to its customers and to the community. The VHI also has a particular responsibility to its owner (all of us) to ensure its financial stability by being required to adhere to the same EU solvency regime which is mandatory on all other non-life insurers throughout the EU.
Mr Sheridan was quoted last summer as saying that failure to introduce risk equalisation would leave the company at the point where it will be insolvent in about two year's time (The Irish Times, July 27th, 2005). That is a most unusual statement for a chief executive to make - not least the CEO of a major State-owned insurance company in the financial services sector where the collateral damage of any such development would be systemic and enormous.
The Government and the VHI, which it owns, continue to attempt to convince us, the consumers of private health insurance, of what is surely one of the great myths. Namely, in the absence of transfers of cash reserves from BUPA Ireland, its much smaller competitor (465,000 customers), VHI will be insolvent in two years and the private health insurance market will prospectively collapse.
As a consumer with some background in non-life insurance it seems to me reasonable - indeed imperative - to raise the following issues. The CEO of the VHI now needs to display clearly the month by month progression of the balance sheet and profit and loss account as the VHI proceeds from being an audited, profitable, adequately reserved going concern in the 2005 Annual Report to insolvency over the next 24 months. The important figures to watch will be the cost of claims, the movement in reserves and total premium income.
In addition, if there is any substance in Mr Sheridan's doomsday scenario, common sense alone would require that the Financial Regulator and the VHI's owner - the Government - be actively engaged in crisis management on behalf of 2,000,000 insured customers.
In fact the irony here is that the VHI, which is managing by far the largest non-life insurance book in the country, is not regulated by the Financial Regulator in respect of its indemnity PHI business. Moreover it continues to be exempted by the Government from the solvency requirements which are applied to all - and I mean all - non-life insurers throughout the EU single market.
This means two things. The first is that the doomsday scenario simply has not been spelt out, which undermines the VHI's whole argument. And secondly, because the VHI continues (inexplicably) to be exempted from mainstream regulation, there is no watchdog to bark a warning. - Yours, etc,
EDDIE SHAW, Villarea Park, Glenageary, Co Dublin.