Southern Cross fights back

Southern Cross’ current charging formula means younger people can save as much as 60% on premiums by changing to another insurer, one broker says.

That has allowed rivals such as Tower, Sovereign and AIA to make inroads with the important 18-35 age group, the broker says.

Southern Cross’ plans to adjust premiums by annual age bands might make it unpopular with older customers, who will pay substantially more. But this will be outweighed by the potential gains to be made from attracting younger customers, the broker says.

Older customers are a less "dangerous" group to annoy because they often have prior conditions, making it harder for them to change insurer compared with younger people.

The pressure that an aging customer base can put on a health insurer’s business is illustrated by data from the Health Funds Association (HFA), which shows that older customers tend to cost more in claims.

Average annual claims for 25-29 year-olds in the June year were $188.57, HFA says. This figure jumps to $340.03 for 45-49 year-olds, $533.30 for 55-59 year-olds and $796.57 for 65-69 year-olds.

The pressure this claims trend puts on insurers is emphasised by the fact that the number of people with health insurance starts climbing around the 35 year-old age group, before falling again among 55-59 year olds.

About 33,704 25-29 year-olds have major medical insurance, while 34,432 have comprehensive insurance. However, about 61,060 40-44 year olds have major medical, while 64,388 have comprehensive.

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