Health insurance premiums have increased significantly in recent months, with many older and retired Cantabrians contacting Chris Lynch Media to express concern about affordability.
Some customers have reported steep rises in their premiums. One Southern Cross member, who is retired, said her premium had increased by 80 dollars to 371 dollars a fortnight, leaving her with no option but to consider cancelling her policy.
To explain what is driving the increases, Southern Cross Health Insurance Chief Sales and Marketing Officer Regan Savage said a sharp rise in both the number and cost of claims is the main factor.
“In 2019, around one third of our members made a claim in any given year. Over the last two years, that figure has risen to 50 percent. So firstly, the volume of claims is up significantly. Secondly, the cost of treatments has also increased,” Savage said.
“Medical providers and specialists are facing the same economic pressures as the rest of the country. For members over the age of 60, the highest possible increase over the last 12 months would have been around 26 percent, assuming no changes to their plan.”
A common question from members is whether it is possible to get a flat-rate policy that does not increase with age. Savage said while the idea is raised occasionally, it is not practical.
“Insurance is a shared risk model. If one group pays less, another group has to pay more to cover the difference. For example, members aged 35 to 39 claim about 200 million dollars a year, while those over 70 claim around 600 million. That is a significant difference.”
“In the last financial year, the average amount claimed by members over 60 years was more than twice the average claims made by members aged 35 to 44 years.
“In dollar value, if we look at claims in the 35-44 age group, the value of claims paid was just over $200 million. This compares to more than $600 million paid in claims for our members aged over 60. In the last financial year FY24, the average amount claimed by members over 65 years was more than three times the average claims made by members aged 35 to 49 years.
Savage said Southern Cross encourages members to review their policies and consider options that match their needs and budget.
“We always recommend talking to us before making any big decisions. One way to manage costs is by introducing an excess. We offer excesses of 500, 1000, 2000 or 4000 dollars. That can make a substantial difference to your premium.”
“For some members, choosing a higher excess effectively means self-funding the smaller claims and relying on the policy for larger medical events.”
When asked if this has been one of the toughest years in terms of affordability for older people, Savage said the landscape has shifted noticeably.
“There has been a clear rise in demand for healthcare services, and at the same time, cost of living pressures are affecting everyone. The combination of increased claim volumes and higher treatment costs is creating challenges across the board.”
For retirees who feel they can no longer afford their insurance, Savage offered this advice:
“We absolutely acknowledge how difficult this is. Our message is to talk to your insurer or advisor and make sure the policy you have still fits your current situation. Consider changing to a plan with a higher excess if it helps keep you covered. We estimate that members with over 20 years of tenure receive around 96 cents back for every dollar they pay in premiums. The longer you stay with your policy, the more likely it is to deliver value.”
Savage said the worst thing someone can do is cancel without speaking to their insurer first.
“If you are opening your renewal notice and feel shocked by the increase, reach out. We can explore options and make sure you are not missing a more suitable plan.”
Southern Cross remains New Zealand’s largest health insurer with over 950,000 members.
