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Trauma insurance 'becoming unsustainable'

Trauma insurance is getting too expensive – and paying out excessively in cases when it’s not really needed, says Sovereign’s chief brand innovation and marketing officer.

Tuesday, November 5th 2013, 4:20PM 3 Comments

by Susan Edmunds

The insurer is launching a new severity-based product, called Progressive Care.

It makes payments for a wide range of medical conditions but how much of the payout a person gets depends on the severity of the condition they suffer.

Anything from 10% to 100% can be paid out, depending on the impact on a person’s physical health.

The policy covers 62 medical conditions.

David Drillien said Sovereign felt there was an opportunity in the market because traditional trauma cover was becoming unviable for consumers and insurers.

“Trauma is growing in terms of definitions unsustainably and we needed to do something to break that cycle. We wanted a product with pricing that was more sustainable going forward.”

Trauma cover was already too expensive for some people, he said. “We talk about underinsurance but overinsurance is a bit of an issue, too. And people have to pay for it.”

Many were covered for much more than they actually would need, he said.

“There are some quite perverse outcomes, people getting pretty significant payments for things that don’t have a big financial impact and from which they can recover pretty well.”

He said some of the heart attack definitions covered conditions that were actually quite minor.

“The treatments are pretty good, it’s not really as significant as it used to be. Even with a bypass operation, you’re lucky to spend a week in hospital now and you might be back to work, if you have a sedentary job, in six or seven weeks. You don’t necessarily need your mortgage paid off, you might need a bit of help but your life is not over.”

The Progressive Care product would pay less overall, he said. But there would not be a target market that it would not suit. “If advisers buy into the idea of trauma payments related to the severity of the illness you suffer, it’s suitable for anybody, really.”

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Comments from our readers

On 6 November 2013 at 12:47 pm Amused said:
Given that Sovereign (and AMP) still insist on paying their income protection and mortgage repayment benefits to policy holders in arrears they out of all the insurers should want their customers to have the peace of mind that comes from having a significant injection of cash from a large trauma pay-out.

Any competent adviser can structure trauma cover for their client to make sure that the premiums remain affordable long term. On that subject there is no point having your client take $1M of trauma cover unless they actually need to have it!

If it’s an affordability thing for insurers themselves to pay out on large trauma policies then don't be offering them to policy holders in the first place. Our clients pay good premiums each month to have financial certainty at claim time!
On 7 November 2013 at 11:51 am Bay Broker said:
Must say, well done to Sovereign for launching this truely innovative product - the training sessions were excellent (thanks to Sovereigns CMO Dr Mayhew). What I like about Progresive Care is the severity based definitions, the ability to claim multiple times, and the affordability. At last an insurer moving with consumers changing requirements.
On 8 November 2013 at 6:53 am billy the broker said:
Personally I would like to see the stats of a client who get a multi payout on this type of policy..Innovative maybe,but for the benefit of who??

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