Southern Cross to review communications after debacle over withdrawn benefit
Southern Cross says it is reviewing the way it communicates changes it makes to the policies it offers following the revelation that many insurance agents were unaware it withdrew a $60,000 a year benefit in late 2020.
Tuesday, September 26th 2023, 10:33AM 
6 Comments
by Jenny Ruth
“We're going to do a thorough review of our communications processes and make sure we do as good a job as we possibly can,” Kerry Boielle, chief sales and marketing officer, told GoodReturns.
Adviser Jon-Paul Hale of Willowgrove Consulting, Graeme Lindsay, who provides analysis to life and health insurance agents through his firm Strategy Financial Services and Russell Hutchinson of industry consulting firm Chatswood Consulting have all told GoodReturns they've only just become aware that the benefit, which previously covered non-surgical hospitalisations, had been dropped.
The wording of Southern Cross' policies does allow it to change the benefits its policies cover, so the issue was whether it communicated the changes it made in 2020 adequately – the removal of the benefit was one of many changes made at the same time.
Boielle reiterated Southern Cross' previous arguments that everything previously covered by the non-surgical hospitalisation benefit remained covered by various other categories of benefits and that it had been a rarely used benefit by Southern Cross policyholders.
The company still continues to insist that it did adequately inform policyholders and advisers at the time.
Advisers had already provided GoodReturns with a number of brochures sent policyholders at the time which enumerated many changes to policies but which did not mention the withdrawal of the non-surgical hospitalisation benefit.
More evidence
Southern Cross has now given GoodReturns a copy of a densely printed two-page brochure sent to Wellbeing policyholders at the time which does explicitly say at the top of the second page: “The non-surgical hospitalisation benefit has been replaced with the IV infusions (non-cancer) benefit.”
It did not say that the withdrawn benefit had offered cover up to $60,000 a year or that its replacement IV benefit provides cover of $600 to $1,000 a year, depending on the type of policy.
As previously mentioned, Southern Cross provided GoodReturns access to a presentation to analysts given in October 2020 which did explicity say at just over an hour in that the non-surgical hospitalisation benefit was being withdrawn.
Southern Cross argues that the new IV replacement benefit still covers what most people claiming the withdrawn benefit had used it for.
Boielle says the average claim against it by 801 people averaged $414 each in 2019.
In the three years before the change, only one member had claimed more than $10,000.
The withdrawn benefit was poorly designed and “poorly utilised. It created a lot of confusion for our members,” she says.
“The main things claimed were overnight situations for sleep studies, IV infusions and rats and mice often associated with surgury” and other treatments.
Low utilisation
“Claiming behaviour and utilisation was really, really low and it wasn't well-understood by members. That's the main reason for changing the benefit. Every single item that was previously paid is covered elsewhere,” Boielle says.
The analysts presentation had referred to 25 policyholders being affected by the withdrawal.
Boielle says Southern Cross identified seven policyholders who had been claiming an average of $6,000 against it who would no longer be covered and had contacted them directly.
They had been receiving treatment from one of only about four private providers and the treatment was much more widely available by the public sector. Southern Cross had given them 12 months notice to transition to a provider in the public sector, she says.
While some other providers still provide apparently greater non-surgical hospital benefits – Partners Life, for example, offers up to $500,000 a year – Boielle says that it isn't possible to directly compare them because, for example, the other companies include cancer treatment but the Southern Cross withdrawn benefit had never included cancer treatment, which is covered by other benefits.
For example, Boielle says in the 12 months ended August, Southern Cross has paid out $37.5 million in chemotherapy claims.
For some reason, Theresa Gattung's famous quote about telcos using confusion as a marketing tool comes to mind.
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Comments from our readers
An interesting experience that five random clients of mine haven't received said communication and everyone else has?
An unusually specific coincidence that all of my clients reviewed on this new point are strangely without the documentation Southern Cross said they sent.
There's a burden of proof piece here for Southern Cross and it's very much lacking at this point.
Interestingly, if we go back to 2018 and look at the communications on those changes, the benefits removed then are front and centre bottom of the first page of the communication.
Doesn't it all boil down to the above 3 words.
If Advisers, Clients and research houses all missed the comms then either there were none or so unclear that no one other than SX knew the change had been made.
SX have a track record of loosing Advisers & Clients trust but often we loose trust but are stuck with them due to health concerns and would it be a good enough reason to move them to another insurer that they do not clearly communicate.
I feel this whole issue has put Advisers square and centre to deal with the complaints from clients as we should have known!
How would FMA have responded if this was an Adviser being misleading?
Thankfully I don't have many clients affected, but makes me distrust SX more.
Yes they have the right to change policy wording but surely this goes with the right to advise clearly for all to understand!!!
One thing is clear to me, advisers need to be very wary of their own potential liability when recommending any one of the many 'non-guaranteed' medical policies available.
The issue of advice and liability does also sit with advisers here as we are supposed to have known of both the guaranteed wordings and policy changes.
I’ve not pushed the guaranteed wording advice aspect as hard. All of my advice for medical insurance since 2012 has discussed and covered the guaranteed wording issues with all providers.
As VFA said the comms issue does let FA’s out somewhat on the SX issue because no one spotted it.
My primary concern is the impact on the million or so people Southern Cross insures, of which about 83% of them do not have a financial adviser looking after them as they are direct to Southern Coss or under a group scheme even more removed.
That's a hell of a lot of people who could be justified in saying insurance companies are misleading and dishonest. My own words for this I can't print here.
This started as an issue raised by one of my clients, but the issue is far bigger than my disgruntled client, or me as an adviser, it has a profound impact on the quality advice we provide and how it is perceived by consumers.
Which is why it becomes an FMA issue, as they are tasked with managing industry transparency, access, and consumer confidence.
This one product review is potentially the largest uncommunicated impact on consumers we have ever seen
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People should not be subject to finding out they have lost benefits when they try and claim. Bouquets to Southern Cross for finally fronting up on this. However, I watch with bated breath as to what the reality will be.
I have to challenge the following statement from the article; "Southern Cross has now given GoodReturns a copy of a densely printed two-page brochure sent to Wellbeing policyholders at the time which does explicitly say at the top of the second page: “The non-surgical hospitalisation benefit has been replaced with the IV infusions (non-cancer) benefit.”
Nothing in the material provided to me by the three clients that have sent through copies of their 2018-2023 communications says this.
"Administration of non-cancer IV drugs change
IV infusions for non-cancer indications were previously covered under specialist consultations or the non-surgical hospitalisation benefit. They are now covered under the separate IV infusions (non-cancer) benefit, providing up to $1,000 per claims year for Medsafe indicated drugs."
Is the extent of the notice provided to all three policyholders in 2020/2021.
There is another aspect here that Southern Cross is relying on time to provide them the basis for their "useful benefit" statements.
* Southern Cross stated that they decided to remove the non-surgical hospitalisation benefit in 2018/2019 (others have suggested Covid as being the reason, but I'll take the planning from Southern Cross' feedback at face value)
*Southern Cross moved things around with the 2018/2019 reviews, defining benefits and adding exclusions (unapproved healthcare services)
* Southern Cross then, in 2021, finally removed the non-surgical hospital benefit after pulling out IV infusions and Sleep Studies (which also exclude surgery for sleep apnea) and distracting us with other "additions" to their policies.
* Now Southern Cross points to the claims stats and those impacted and says it wasn't well used.
Sure, because there was an active movement of acceptable claims, other providers still cover under non-surgical hospital benefits, to defined benefits or exclusions (unapproved healthcare services).
Then, what was left that Southern Cross wanted to cover was defined, and the benefit was removed in 2021.
This means that Southern Cross can point to the 2021 changes and say they didn't have claims in the area, so they could remove it.
My comments last week about the two procedures added to unapproved health services got the response from Southern Cross; "They were not existing procedures that were covered", which they can say because the non-surgical hospitalisation benefit isn't there to initially capture these new treatments.
In saying what they did provided me with examples and made my point about the removal of the non-surgical hospitalisation benefit, removing the automatic capture of new treatments (approved by MedSafe and funded by Pharmac) and disadvantages policyholders.
Additionally, with unapproved healthcare services being referenced in the policy documents, the addition of procedures to this list is effectively adding exclusions to the policy. Again, Southern Cross has not notified policyholders in the past week and a half when these changes were made.
Another point from the article: How many healthcare services were added to the unapproved healthcare services page between 2019 and 2021?
The idea of pointing at claims and saying there were none while we don't have any clarity on what was or was not on the unapproved healthcare services list is still lacking transparency.
Good to see Southern Cross coming forward on this and accepting that communication could be improved, but don't try and spin this as we've misunderstood what they did. It is very clear to the market what has happened, and the resulting noise is back-peddling spin and misdirection.
Well said Jenny, "using confusion as a marketing tool"