A number of insurance companies which already have life and general insurance operations in the Republic are considering whether to expand into health insurance. This follows the publication of the longawaited White Paper on Private Health Insurance yesterday.

Among those examining their options are Hibernian Insurance and Norwich Union. A Hibernian spokesman said yesterday that the company was actively looking at the possibility. Norwich Union, which now has the third largest health insurance operation in Britain, is also considering entering the market.

The White Paper clears the way for the VHI - the Republic's largest health insurer - to become a commercial semi-state company and for it and others, including BUPA, VHI's only rival at present, to offer a far greater range of services.

This will include products which cover the customer for primary health care - such as visits to GPs and dental benefits. Until now, both insurers have been prevented from offering such cover because of existing legislation.

The VHI will also get a £50 million (€63.5 million) cash injection, prior to a flotation or taking in a health insurance partner. Not surprisingly, this has angered BUPA, whose managing director Mr Martin O'Rourke said last night that it would mean £50 million of taxpayers' money being used to support VHI, which, in turn, would probably link up with one of its (BUPA's) competitors.

The general view is that many insurers have been waiting for the White Paper to clarify certain market factors before considering whether to enter the sector themselves.

There are differing views on whether its provisions will lead to more entrants. Mr O'Rourke believes few companies will do so because risk equalisation has been retained.

Risk equalisation - which will be modified slightly - is a means of preventing insurance companies from cherry picking younger and healthier members.

It also means that a company with a profile of healthier customers may have to pass cash payments to other insurers with less "healthy" profiles.

BUPA estimates that, "on a quick calculation", this means it would have to pay VHI £20 million over three years. The Department of Health has disputed this figure.

Mr O'Rourke said last night that his company had no intention of making such payments to VHI.

Significantly, the White Paper allows new entrants to the health insurance market an 18-month period during which they will not be liable to "fully participate" in risk equalisation. This is because of the set-up, marketing and other costs associated with becoming an established player.

The White Paper will open the market to competition and is pro-consumer, according to VHI chief executive Mr Oliver Tattan. He says it will enable the VHI to offer a far wider range of products and will allow the company to act commercially.

He believes it also will encourage others to enter the market which he maintains is very underdeveloped. Department of Health figures released yesterday showed that an estimated 42 per cent of the population had private health insurance and health insurers currently paid out £350 million in claims, annually.

The VHI has almost 1.5 million members, while BUPA, which only entered the market in 1996, has 110,000. Mr Tattan accuses its rival of cherry-picking customers, a claim rejected by BUPA.

Around 80 per cent of VHI's customers are in corporate or group schemes. Mr Tattan believes there is room for further expansion.

He says 30 per cent of the population has a medical card (entitling them to free medical treatment), but there are still many people who should have medical insurance, but do not.

Mr Tattan maintains the proposed £50 million cash injection is "an investment" not a subsidy and that the Government will recoup the monies when the VHI is floated or takes in a new partner. He says the monies are needed to bring the company's solvency standards up to what is considered best practice in the health insurance industry.

"Our reserves - which we built up with no help from the Exchequer - are now 28 per cent of insurance premiums. This will bring the figure up to over 40 per cent," he says, adding that any insurance company would want reserves to run at the latter rate.

Some of the monies will also be used for product development, he says. He believes the necessary legislation to change the organisation's status to a commercial semi-state should be in place by the spring.

Mr Tattan accepts more competition in the marketplace will naturally mean the VHI will have to fight harder for business. "We want the VHI to be synonymous with all of your healthcare needs," he says.

It is not yet known how much the VHI is worth - industry estimates are in excess of £200 million. The Government has pledged to introduce an employee share option scheme for staff, similar to the Eircom model which would give the 500 staff a significant payout if they were to share in a 14.9 per cent stake.

VHI pre-tax profits rose sharply last year, jumping to £11.2 million (€14.22 million) from £2.8 million the previous year.

As the dominant market player, it is certain to be attractive to any other insurer seeking a significant market presence. However, the price it fetches and the level of interest it finally attracts remains to be seen.

One industry source said last night the entry of BUPA three years ago had scared off a lot of prospective competitors. Although it has a far smaller market share, it is still seen as a serious competitor.