by Jenny Ruth
“Thanks for the information, we are aware of the situation,” the FMA said in response to GoodReturn's questions, which included whether the regulator was investigating or if it planned to investigate.
“We generally do not comment on individual providers,” the FMA said.
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 said they've only just become aware that the benefit, which previously covered non-surgical hospitalisations, had been dropped.
None of those complaining about the situation are saying Southern Cross didn't have a right to drop the benefit – the wording of the company's policies expressly allows it to do so – the issue is whether it adequately communicated the change.
As GoodReturns has already reported, Southern Cross provided GoodReturns with a link so we could verify the situation ourselves – normally such presentations are available to advisers only.
Just over an hour in to that presentation, Southern Cross does clearly state that the non-surgical hospitalisation benefit was being removed, but assured advisers their members would still be covered by other benefits.
It said it was removing it “to avoid confusion” that it said was occurring and the accompanying slide said that the changes would affect only about 25 of its members.
The company said the benefit was most often used for non-cancer IV infusions.
What Southern Cross failed to make clear in the presentation was that a $60,000 a year benefit was being replaced by a benefit worth $600 to $1,000 a year, depending on the type of policy, to cover non-cancer IV infusions.
GoodReturns has already reported that advisories sent to Southern Cross policyholders at the time focused on new benefits and talked about “changes” but nowhere did the company say the non-surgical hospitalisation benefit had been dropped.
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True, Southern Cross has a right to do what they like with its policies, and the consumer has to put up with it.
However, if you reference clause 6.2 of Southern Cross' terms and conditions (which you can access on their website) they state they will give 30 days notice of this:
6.2 At any time Southern Cross may, by giving 30 days prior notice, change or update which
Healthcare Services are eligible, the scope of cover, and terms and conditions of this Policy.
And 6.3 states they will communicate it
6.3 Any notice required to be given by Southern Cross under clauses 6.1 and 6.2 will be given in writing (including on the Southern Cross website or by email) in accordance with clause 18.1. The Policyholder is responsible for advising Dependants of any changes to the Policy.
*18.1 stipulates communication methods and updating of details.
So when you reference the communication to policyholders on the 22nd of November 2020 and find this statement:
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.
You could be forgiven as a policyholder, adviser, or a product researcher that there was no notice of the non-surgical hospitalisation benefit being removed.
There were also a bunch of other "new" things announced in that update.
Fundamentally this here is the problem:
* Southern Cross did not meet the requirements of their own terms and conditions in communicating the removal of a $60,000 per annum benefit.
* The execution of this is commendable for its success in being missed by everyone for the better part of three years. However, it breaks a few more rules around culture and conduct that even the FMA has had something to say about.
Then we have the Fair Trading Act, unfair contract terms that AIA is citing to break contracts and make terms and conditions worse for their policyholders. Doesn't that apply here?
Though that's technically incorrect, as the UCT for the FTA bit isn't the bit that operates here, it is the FMCA 2013, the FTA on steroids, that applies instead of the FTA.
There is customer harm from this action, and while Southern Cross can chomp at the bit about the suggestion of them avoiding Covid hospital claims, the timing and execution of this two years after they said they decided this, just leaves a bad smell in the air.
Especially when they rolled out other changes decided at a similar time far earlier, the above comment suggests they are back peddling and covering up with spin rather than fronting up and facing the music.
I hope they documented all of this for the FMA when they come knocking, as it will be interesting if they haven't got the documentation required as they have been operating.
As I have said elsewhere, time for Southern Cross to front up, fall on its sword, put things right and sort out its impacted policyholders. The fundamental breach of trust this represents is not something we can put up with as an industry.
An insurance policy is a promise to turn up and put right the loss when the time comes in exchange for a sum of money to do so.
Broken promises do not make for confidence in our industry by consumers. One of the base points the FMA is here to ensure happens!