The Federal Government should look at its involvement in the health insurance sector before calling for the industry to cut premiums, an actuarial consultant has claimed.

Finity Consulting Principal Jamie Reid says health insurers can do little to cut premiums, as they already operate close to their margins.

“The insurers can either go for profits or expenses if they want to cut costs,” he told insuranceNEWS.com.au.

“There is a lot of government regulation in the sector and there is no evidence of excessive profits.”

Mr Reid says a number of health insurers still operate as mutuals and put profits back into funds to keep premiums competitive.

“The Government must realise they control prices and they are the owner of the largest health insurer,” he said.

“If they want the industry to be more competitive, the Government needs to look at its role.”

Mr Reid says the health insurance industry is unlikely to attract further players in its current state, as the restrictions make it a difficult market to penetrate.

“International insurers do look at the Australian market but baulk at the regulatory framework,” he said.

“Because the Government requires insurers to contribute to a pool to cover claims and product differences are limited by regulation, it does make the Australian market unattractive.”

Mr Reid says these restrictions mean all insurers have to charge a high premium, regardless of the efficiencies of the company.

“It is important to have competition in the sector and for the Government to review the regulations,” he said.

“There is also the question as to if a [Federal] Government will sell Medibank, so they can’t have their cake and eat it.”

The Government is establishing the Private Health Insurance Premiums and Competition Unit to find ways to increase competition on the sector.

Mr Reid says the Government is expecting insurers to pay for this unit, which is galling for the industry.

“If the Government is unhappy with private health insurance competition, perhaps it should try letting the market set prices,” he said.