Southern Cross Benefit Review – Medical Insurance

Southern Cross have had some bad press this week (see story here). After their annual benefit review, they have announced that they will be reducing some benefits and removing others altogether.

What is changing?

• Removed or Reduced Obstetrics Benefit, depending on the plan.

• Removed Funeral Benefit, Public Hospital Cash Grant, Premium Waiver, Sterilisation Benefit (snip snip)

What is really going on here?

Overall this highlights two things.

Southern Cross and a few other insurance companies do not have guaranteed policy wordings, this means that with 30 days notice they are able to remove or amend benefits from the policy that clients signed up for. Three providers in the market have guaranteed wordings, they can still amend the policy wordings but only to add/improve benefits, not remove benefits.

Health insurers continue to struggle with medical inflation and increased claims, premium hikes are constant, not just age related (higher each year that you get older as you are more likely to claim) but also increasing the cost of medical insurance across the whole product range.

In the last few months there have been the following increases to existing product ranges.

• AIA Male 6% increase, Female 12% increase

• Sovereign 9% across the board plus a reduction in the discount provided for having an excess

• NIB Average 8% increase across the product range

• Last year Partners Life increase rates and increased the policy fee.

What is medical inflation?

As technology continues to improve the cost of medical procedures continues to rise. Less invasive treatment means a faster recovery time and better medical outcomes for patients, however the higher cost effects premiums.

Overall Medical Insurance premiums will continue to rise at an exponential rate, this may make private cover unaffordable for the middle class putting even more pressure on the public system. Unless we get some innovation from insurers it could be difficult times ahead.