“People trust Qantas and we’re not going to go into these spaces unless we do it in a way that enhances that trust,” said Qantas boss Alan Joyce while announcing the airline is expanding its insurance business.

Sorry, Alan, that’s not true – you’re not enhancing our trust in Qantas when you rent out the brand to flog second- or third-rate insurance products.

That’s what Qantas has been doing for two years now in the health insurance space. Qantas shareholders make money out of it, and Qantas executives cop even bigger bonuses, but Qantas customers are poorly served by being sold substandard insurance.

When customers eventually realise the offer of 100,000 frequent flyer points has enticed them to buy second-rate health insurance, their trust in Qantas is diminished, the Qantas brand cheapened by the management’s dash for cash.

The Qantas Health Insurance that unceasingly bombards frequent flyers’ email with “free” Qantas points offers is actually NIB Health Insurance with a flying kangaroo sticker plastered over the NIB name.

On most metrics, Qantas Health Insurance (alias NIB) underperforms the health insurance industry average, let alone the way it lags well behind the better insurers.

NIB does clearly outperform the industry in one area – profitability.

That’s because NIB pays out a lower percentage of insurance premiums as benefits, keeping more of each customer’s dollar for shareholders, management expenses and marketing. Those “free” Qantas points cost money.

As previously reported here, NIB’s latest annual profit results boasted a gross margin of 18.6 per cent, compared with the health insurance industry’s average of 14 per cent.

Put another way, NIB’s gross margin is one-third higher than the industry average, meaning NIB (Qantas) pays less money back for customers’ medical needs.

But it’s not just about shareholder dividends and CEO bonuses. A website comparing Australia’s 10 largest private health insurance companies lists NIB as having the equal second-lowest customer satisfaction rate of 68.3 per cent. The other seven were above 70 per cent, three above 80 per cent.

I haven’t found a doctors’ satisfaction measure of health funds but, anecdotally, NIB rates poorly. A surgeon friend bluntly says NIB is the worst to deal with.

The Australian Medical Association private health insurance report card last year found that of 36 insurers, NIB covered the lowest percentage of hospital related charges in Victoria and Queensland and was the seventh-lowest for New South Wales.

The Australian Society of Ophthalmologists president, Dr Peter Sumich, tweeted in response to that earlier NIB story that he would charge on a “no gap” basis for some patients for genuine compassionate reasons.

“But never for NIB patients because they are not even close to market rate,” he said. “Therefore the gap payment defaults to schedule fee, and NIB pockets the patient’s gap!

“This is called differential rebating. Scam.”

Tweet from @presidentaso

Dr Sumich also tweeted:

“One must admire the business acumen of their CEO though, while lamenting the benefits for their policyholders.

“Proven business model: cheap insurance + low payouts = profit.”

Tweet from @presidentaso

It gets worse. The NIB (Qantas) insurance isn’t necessarily cheap either.

NIB (Qantas) fares poorly on the federal government’s independent private health insurance information service, PrivateHealth.gov.au.

I ran a variety of scenarios through its dynamic comparison service – young single, young family, older couple, all living in NSW.

NIB (Qantas) failed to make the top ranking for how well their policies covered important services, as well as other listed services relative to other policies.

Despite that, NIB (Qantas) was middling on the cost of its premiums.

The government site reports NIB’s management expenses took 10.5 per cent of customers’ contributions, compared with the industry average of 8.9 per cent.

NIB’s member retention was 78 per cent while the industry average was 82 per cent.

But NIB managed a 6.8 per cent surplus, the industry 5.6 per cent.

The comparisons are more invidious when made between NIB and the better health funds.

For car insurance, Qantas is hiring its name to the UK-based Budget Insurance group, operating in Australia as Auto & General.

Auto & General in turn runs several car insurance brands, most prominently Budget Direct, but also Virgin Money, Australia Post, ING, Ozicare and 1^st for Women.

Curiously, Auto & General scores well on the productreview.com.au site as Budget Direct, middling as Australia Post and not so well as Virgin Money, albeit with a much smaller review size.

Auto & General might be great, or it might not. There’s no independent government service to rate it.

But given the health insurance track record, having the Qantas brand stuck over the Auto & General name is no indication of the quality of insurance being sold with the lure of frequent flyer points.

In any event, it’s more than a bit rich for Alan Joyce, Australia’s highest-paid CEO last year, to claim Qantas renting out its name enhances trust. It risks trashing it.