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Consider trauma instead of medical cover: Partners

Advisers should sometimes consider whether trauma insurance is a better product for their clients than dearer medical insurance, Partners Life’s chief operating officer says.

Friday, May 24th 2013, 6:00AM 17 Comments

by Susan Edmunds

Hayden Jonas addressed the Institute of Financial Advisers conference in Auckland yesterday.

He stepped in at the last minute for Naomi Ballantyne, who was called off to an urgent meeting.

Jonas said there was a perception that medical insurance was not sustainable because up to 90% of premium income was paid out in claims.

But he said the statistics were skewed by the inclusion of captive insurers who were no longer taking new clients. “They have an ageing client base, with an increasing claims ratio because they are unable to offset that with new business.”

Jonas said other companies tried to undercut the market from time to time and it could take a while for those blocks of business to become profitable.

“It also includes companies whose policy wordings, underwriting quality and/or claims management processes did not, or do not allow them to manage claim ratios effectively.”

He said medical inflation that outpaced general inflation had also been identified as a problem but many treatments were also becoming more effective.

Jonas acknowledged that affordability tended to drop for older age groups, who were more likely to claim.

He said advisers dealing with clients in that position could encourage them to save in their 40s and 50s to cover medical insurance premiums once they retired. Or he said advisers could consider whether a trauma product would offer a better outcome.

Jonas said health insurance might need to change in future so that it targeted only the areas where the public health system did not apply.

He said the New Zealand medical insurance industry was too disjointed to have yet campaigned effectively for measures such as tax breaks for medical insurance policies.

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Comments from our readers

On 24 May 2013 at 11:30 am Zak said:
Wow now I have heard it all - talk about vested interest. As I understand it Medical Insurance cannot be reinsured away by any underwriter and thus they must pay 100% of claims they accept 'can someone please confirm'. Do we take from the speech that Partners does not have sufficient capital to make medical claim payments and wants its Advisers to sell Trauma instead?

Lastly I cannot believe that anyone would recommend Trauma as an alternative to Medical cover as they are vastly different products designed to deal with different things. Cannot wait to see this discussion unfold over the next few days.
On 24 May 2013 at 11:49 am billy the broker said:
Wow is an understatement!!!! I am going to wait for the stream of comments on this one...
On 24 May 2013 at 12:41 pm Feliz navi da said:
First time contributor...so excuse my bluntness.

I am glad I was not in the audience listening to this – simply outrageous and condescending to all advisers (and our clients). I will recommend the most appropriate solution for my clients, and then work with them to ensure an affordable option. To suggest Trauma is an option for medical is preposterous. When Trauma covers hip replacements, grommets, ACL reconstructions etc then, maybe, I might look at this. Mr. Jonas, (and Partners Life) with all respect, please let the experts make the recommendations.
On 24 May 2013 at 1:22 pm AFA Muggins said:
There is another issue here - Medical cover assists to help prevent more serious situations developing.

Trauma cover is for after the event.

On 24 May 2013 at 1:49 pm Observer said:
@Zak - Really??

Seems as soon as you see Partners Life, it's doom and gloom. I assume you have made yourself familiar with the paper issued by the New Zealand Treasury regarding the funding gap in the public health system? I would encourage fellow advisers to download the report and have read if you are selling medical insurance. It makes sober reading.

I would suggest that all medical insurers are pondering this, as the paper advocates rationing through a number of mechanisms:
1) co-payments - increasing the amount you pay for medication or Drs visits, and/or extending co-payments across a wider spectrum of services.
2) Funding controls - Further rationing of elective services and perhaps changing to waiting list criteria
3) fixed budget constraints – Longer waiting lists because of caps on spending
4) defining services covered - At the moment optometry and adult dental care are not publicly funded. Under this banner, the government could extend this list to exclude any number of health services

Treasury reported that if the proportion of private funding within the system were to increase from 17% to 25%, the government would save @$2 billion dollars. I am sure insurers can’t suck up $2 billion. This would impact Southern Cross, Unimed, Tower, AIA, Sovereign, Accuro, as well as Partners Life. Would have thought those that are primarily health insurers will be the most impacted.

I suggest that this is not an issue with Partners Life, but a wider industry issue in that if more responsibility for health care is moved to private insurers, then it should not take much to work out that premiums will increase and probably at a rate faster than they do now.

The number of people with private insurance, according to the Health Funds Association, was down by 0.8% in 2012. I should not take much to work out that if costs move from public to private, then premiums will raise, and at a level where affordability is an issue. When this happens, how do you fund your cancer treatment, or your heart surgery?

Zak and others, let's get past the ‘Let’s have a crack at Partners Life’ and put out toys back I the sandpit.

I haven’t seen howls of outrage at the Tower (NIB) approach, which is to add an optional benefit to their cover called ‘Serious Conditions Benefit. If you took out and read the Tower benefit, it aligns to Trauma and is designed to fund things aortic surgery, coronary artery surgery (the list goes on). All the conditions that you would see in a trauma policy.

We all have our preferences when providing advice, but perhaps you need to look past today and consider what the future could hold (risk planning covers, tomorrow, next week, next year, and years to come – not just today).

What will you say if a client cancels their medical insurance, gets consigned to a waiting list, then realises that they may have been able to take a trauma cover, even for a nominal amount of $50k, and that would have meant no waiting list (add buyback if you like).
On 24 May 2013 at 2:11 pm Paul Charles said:
Feliz - welcome and great to read your contribution. I totally agree with your sentiments - it is absolute tripe to suggest Trauma replace Medical insurance as a product line.

Last year I personally assisted at least 30 of my clients with health claims, ranging from triple bypass to wisdom teeth and many and varied claims in between - and many of them would not have been trauma claim related.

They are two very different products and they both have their own needs in a well executed risk plan.

To make these comments at an industry forum makes me feel very suspicious of the key underlying reasons behind these comments.
On 24 May 2013 at 2:14 pm Vinnie said:
Cor blimey - next he will be suggesting we replace life cover with third party motor vehicle insurance.

I can see a ripper Tui ad for this one.....
On 24 May 2013 at 2:40 pm Bay Broker said:
90% of premium paid out in claims - great story. Medical is doing its job, that is insurance at work. What is the percentage being paid out by Trauma insurance? Observer, where there is smoke there is fire - I am sure Partners use reinsurance for Trauma and still pay high upfronts... think about it.
On 24 May 2013 at 3:09 pm Broker said:
I agree with observer and congratulate Hayden for making the comment. In many cases (especially where affordability is an issue) a bit of trauma has to be better than nothing and some sort of cover for a major health issue such as cancer etc...

All the insurers are struggling with medical so there clearly is an industry issue.

Have a look at what cars your medical specialists are driving and that might suggest where some of the money is going.

I heard a Tower BDM suggesting to us recently that we should consider recommending medical before anything else - life, income cover, trauma etc...I thought that was a bit out of line...
On 24 May 2013 at 3:09 pm Reality said:
65 year old male $200k trauma, enough for say any heart op plus follow ups, a joint replacement, plus all the ancillary charges... around $1200 a month. Medical insurance, $200 a month, which covers everything, not just the 40 odd conditions in a trauma policy. Tell me again why this Trauma is better advice?
On 24 May 2013 at 3:36 pm Wazza said:
It appears to me that some critics here just want to have a crack at anything Partners Life do or say and would be less than surprised that if some comments are coming directly from other insurance companies and possibly one in particular. It also appears that those commenting have not read the article in context. Hayden Jonas is not advocating Trauma as a replacement for medical cover but encouraging both saving and planning in the 40's/50's with other options such as Trauma when in retirement the cost of medical cover could become unaffordable, a very sensible approach.
On 24 May 2013 at 3:45 pm Observer said:
@Bay Broker. The only smoke is me getting hot under the collar. As an industry trying to portray a façade of professionalism, I am amazed, and at times horrified, that ill-informed comments reflect the industry.

Given the statements, I can draw the conclusion that Zak, Vinnie, and Fleiz navi da did not actually attend the session. Perhaps a more enlightened individual could confirm Partners Life stated that Trauma should replace Medical.

I did not pick up from the presentation or the article above that Partners Life advocate replacing medical insurance with trauma. I am sure that the comments will continue over the ensuing days, and one hopes upon hopes that those who seem to find fault in everything to do with Partners Life start to understand the industry faces the burden of higher premiums and it’s not a conspiracy.

I agree with Paul Charles that they are different products with different needs. If you wanted to challenge advisers thinking, could you have thought of a better forum?

What I find ironic is that every time Partners Life’s name is mentioned, the forums fire up. Partners must be loving the free publicity. At the end of the day, one can never attribute to malice that which can be adequately explained by a lack of understanding.
On 24 May 2013 at 4:36 pm Raymond W said:
Welcome the day our government (re) introduces taxation rebates, so our clients can afford trauma and medical insurance together. Wazza, I wish everyone at an older age could save and have insurance - in my market very few people manage to do any of the above, rather food and electricity payments are key.
On 24 May 2013 at 4:45 pm Noel said:
Don't like this comment, without reference to the insurers; “It also includes companies whose policy wordings, underwriting quality and/or claims management processes did not, or do not allow them to manage claim ratios effectively.”

What insurers are you referring too? Surely not Partners, given recent layoffs...
On 24 May 2013 at 5:01 pm 6ftndr said:
I would assume that there are not many 70 year olds who can afford health cover, and if they can then they don't need it.

Trauma is fine in some situations, maybe they need to add a 133rd condition that is covered - "private hospital care to the value of 50k"?

Maybe they could also get their thinking caps on and start to bring out a more streamlined medical policy - one which covers certain things only and therefore doesn't cost as much.

Insurance companies product and marketing department people are so 1990!
On 24 May 2013 at 11:25 pm billy the broker said:
Firstly..I do respect people's comments here....so don't take offense eh..It's an open forum.

When Partners morphs into another company, which with the track record it will....take away the love affair some of you have with these very astute business people...will you be speaking their praises when they set up again and we have this same discussion with another start up insurance company?

How many times has this happened already?

And how many times does it have to happen for it to sink in that the persons who are winning is not you or the clients?

Wake up and get a grip.....Smell the coffee....Policy wordings blah blah blah.....Now I have and will put this puppy to bed for this thread...because I do not have an ego the size of some people.....Have a great weekend guys and gals...

[This post has been abridged]
On 27 May 2013 at 11:45 am Janet Natta said:
Here's the thing - I was in that seminar, and I must have dozed off for a second, as I didn't hear Hayden say that AT ALL! He was talking about the myths that surround the long term affordability of health insurance. If he did make that comment about the trauma, which I do not recall him making, it would have been maybe as a response to a question? Does anyone else who was there recall him saying that??

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