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Premium increases: An adviser would have helped

Southern Cross clients who complained to the media about premium increases could have found ways around it had they sought advice, one financial adviser says.

Wednesday, January 9th 2019, 6:00AM 3 Comments

Graeme Lindsay, Strategy Financial Services

It was reported last week that one couple in their 60s had an increase in monthly premiums of almost 20%. In another case, a 30-year-old saw his increase from $96 per month to $121 a month.

Graeme Lindsay, of Strategy Financial Services, ran the numbers on the cases and said the Southern Cross Wellbeing Two product’s premiums had increased at a rate of about 20 per cent year on year for the 62- and 64-year-old clients while its UltraCare lifted 9 per cent.

He said, if the clients had had an adviser, it might have been suggested they consider something such as taking an excess - or increasing it - to reduce their premiums.

In cases where they were applied per person per year, people could save more in premium reductions each year than they would pay in the event of a claim if they added an excess, he said.

“Excesses with good products are per person per year while bad products are per claim. If they're per person per year you’re better off once you get to about 50 taking a $50 excess than with a zero excess.”

He said Southern Cross policies were not as cheap as they used to be and should be cheaper. They did not provide as much non-Pharmac cover as most adviser-distributed policies. Southern Cross does not guarantee wording.

Nick Astwick, chief executive of Southern Cross Health Society said the premium increases being implemented were not an outlier for the industry.

“In the last financial year, across Southern Cross Health Society’s policyholders there was an overall increase in average premium of around 7%. This takes into account factors such as the ‘rate card increase’, discounts applied and different policy types.”

That 7% was similar to average premium increases over the past 10 years, the insurer said. It is also similar to the average annual increase reported by nib in its recent premium review.

“On an individual level, each member will experience a premium change that may be significantly different to that average. This is due to a number of factors, the biggest of which is ageing," Astwick said.

"Each year as each member gets older their premium will increase, reflecting a person’s greater likelihood of needing to claim. In general terms, premiums increase as you get older because you are more likely to claim. For example, those aged over 65 make up 13% of our membership, yet account for 36% of claims costs.

"Other factors that may have either a positive or negative effect on members’ premiums include the healthy lifestyle reward, low claims discount, changing their policy type, membership of a work scheme or paying by direct debit. We continue to work closely with our network of advisers, including keeping them informed of changes to premiums and the reasons why.”

Southern Cross aims to pay out 89c in every dollar of premiums paid to maintain its solvency. Last year, it returned 92c.

He said claims affordability was an issue for health insurers around the world.

"A continued area of focus for us is striking a balance between delivering excellent value to members and premium affordability.

"This year, claims inflation rose 8%, while the Consumer Price Index was just 1.5%. We’re working closely with healthcare providers to look at ways to manage this. Southern Cross Health Society reviews its pricing on a regular basis. However, premiums applying to an individual policy generally only change on annual renewal.”

Tags: health insurance Southern Cross

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Comments from our readers

On 10 January 2019 at 11:02 am Dirty Harry said:
It's both dishonest and disingenuous to state the average increase. Of course it is a nice low number, however several insurers have used it as a way of communicating their pricing strategy, even though it will not match the experience of most of their customers.

My phone doesnt ring when a 7% price rise rolls through, but the guy with a 20% plus hike doesnt give a rat's arse about anyone else's premiums, or the average. If anything, in terms of brand and PR, publicising the average and then giving an individual almost triple that number is downright stupid.
On 11 January 2019 at 3:35 pm Mark Sheehan said:
Dont worry, now there are no more overseas incentive trips we can expect these premiums, along with risk products, to start decreasing.
On 14 January 2019 at 9:46 am Keith Walter said:
#Mark - Yeah right!

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