Smoker or non-smoker? Are you sure?
Recently, I've had an interesting discovery with a client coming of age on their parent's policy, and they were transitioned to their own cover on smoking rates without any input or questions from the client.
Saturday, November 25th 2023, 6:25AM 
3 Comments
by Jon-Paul Hale
Yes, that's correct.
I dug a bit deeper, and I found this was in the policy wordings, the old Tower Premier Health policy. It was changed sometime in 2007/2008 to pick up auto allocation of smoker rates when continuing a child on to adult rates and policy.
This prompted me to question the long-held assumption: are non-smoker rates non-smoker rates?
Thankfully, the majority of the answers from providers came back with the answers we all expected.
In general terms, a couple of exceptions do exist:
* If the person has not smoked for 12 months, they can be considered a non-smoker and have non-smoker rates for new cover.
* If the person ceases smoking for 12 months, they can request to move to non-smoker rates on their existing policy.
Southern Cross doesn't specifically rate for smokers; they won't give the 10% healthy living discount for a new cover, but they will get the 10% low claims discount after two years if they have low claims.
Where this seems to get wobbly is with nib.
Talking to a senior manager at nib back in June, it appears my client slipped through on some work nib had completed when moving children to adult rates migration not to change to non-smoking rates automatically.
This raises some questions; the policy wording for Premier Health is where this example was; however, looking at the Ultimate Health policy wordings, the same smoker rates transition for this product range applies, too.
This is where product and operations often have differing opinions, and "how we have always done it" sometimes isn't appropriate.
I've made my points on the Southern Cross changes, removing a stalwart of medical policy structure we have all known forever. Most advisers don't know about this historical change in the background of Tower's policy until they trip over it with a client like I did.
Another one to remember is the old OnePath Major Medical cover; the excess applies per claim, not per policy year like the rest.
Overly familiar understanding of policy structures can trip us up, so we rely on research companies to double-check things and ensure that changes slipped under the mat aren't missed.
* That's a plug for having a research provider in your business!
The flip side of my deeper dive into medical policy wordings, which is dramatically in nib's favour, is unfunded or non-Pharmac medicines; nib starts paying claims if the medications are related to a hospital admission.
This is significantly better than the cancer diagnosis or life-threatening condition criteria in other medical policies.
With all policies, there are pros and cons of a particular approach, and my point here is that "selling" a policy on a square peg round hole approach is not what is expected of us any more.
For the life adviser segment that does medical insurance as an "extra", medical is not an "extra". Medical insurance is now a core risk aspect for people and has been for quite some time.
The approach to medical insurance of 'Do you want fries with that?' has to change.
The products are significantly more complex, and the nuance of application with the abysmal response of the public health system demands we do better.
In this quest to clarify the approach to smoking/non-smoking, one provider mentioned they canvassed operations staff on the subject and got a surprising response that half knew the rules and half didn't.
That provider acted swiftly to define the rules and make staff aware of them so that things operate as we expect them to. Well done on doing this; we all benefit from the consistency.
Overall, I'm pretty happy with nib's response and management of the smoking issue, but their policy wordings needs a tidy-up to match how they operate.
My final poke at nib comes with two questions on the clause below;
1. How do you police this?
2. And do you really expect non-smokers taking up smoking to advise you?
Current Ultimate Health Max wording:
Changing the insured person's smoking status
If the smoking status is not known, smoker Premiums will apply. If any Insured Person (aged 21 years or over) changes their smoking status (including any tobacco or any other substance), they must complete an nib smoking status questionnaire and send the completed questionnaire to us. We will require at least 30 days' prior notice before this change will be applied on the policy.
I'm expecting that this is to change from smoking to non-smoking, and non-smoking to smoking will be ignored.
That said, this issue with smoking/non-smoking for kids to adult products also applies to some of the life & trauma products we come across.
But then again, you really don't know what you'll find in a policy wording until you go poking around ;)
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Comments from our readers
The old OnePath policy is different to the old Tower and nib policy wordings. This smoking issue wasn't in the old OnePath wordings.
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There's a few things in the nib policiy wordings that aren't matching the reality of operations, and this needs a tidy up.
As many of us have expereinced, while we have policy wordings that are different to the operation of the policy like this (operations being more favourable than the wording) it only takes a change of management or a different lens and things get changed to be far more difficult and unworkable.
A good example of this is the old Sovereign Group MajorCare where terms have been applied to the policies on continuation that are quite different to the rules of the cover when it commenced. Especially those that commenced when the cover was both guaranteed and covered non-cancer unfunded meds taken before November 2003.