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NZ Survey Shows Premium Rise a Worry for Older Health Insurance Customers

Researched conducted by Canstar New Zealand has found that older New Zealanders are the most concerned about rising premiums on health insurance. 

Lars Bojsen-Moller of Southern Cross Health society, said if the insurer compared the number of 64-year-old members insured on January 31, 2015, to the number of those who were still insured on January 31 this year as 65-year-olds, 939 had cancelled. 

At June 30, 2015, Southern Cross, New Zealand's biggest health insurer, had 105,752 members aged 65 years and over, or 13 per cent of the total membership. 

Claims made by older members were $295,663,108 for the 2015 financial year, or 35.65 per cent of all claims.

Of course, we are not told what share of the premium members over 65 are paying - they may be paying about 35% of the total premium. 

Click here to read more of Stuff.co.nz

Advisers Takes Issue with Unfunded Cancer Estimates

JP Hale at Willowgrove Insurance has taken issue with the estimates of the size of unfunded cancer treatments:

Regarding this blog (link) Both Naomi and Rob are a little off base with their comments. Currently unfunded cancer treatments aren’t driving claims. No surprises there. Very simply Partners book is only just getting to a point where these sorts of claims are getting submitted and nib haven’t been in the space long enough to know anything about it yet. Add to this the real issue of only 2.19%, +/- about 1%, of the population actually have the coverage.

Southern Cross who have a contribution of $10,000 on their policies will genuinely see the claims that are expensive, even then it’s 42% of the 15% of cancer claims utilising un-funded medicines are over $10,000, the rest are within the policy limits at Southern Cross. Effectively the risk of a large claim you have to pay for with Southern Cross is about 6% of cancer claims and the risk of having to pay for your cancer treatment is about 15% of all cancer claims of which 58% will be under $10,000. If 30% of the population get cancer and 15% of them need to pay for cancer treatment, the current unmet need by insurance and public purse is huge, about 200,000 people of the current population, that be a lot of people. Unfunded medicines will become a significant issue in the future as well as presently with the limited situations we currently have, this blog of mine expands out the market side of things around this (Link).

I like that JP has attempted to quantify the need. I would really like to see a medical insurer describe their future estimates of costs, sharing some quantification of the expected risk, because it would help advisers construct advice for clients, and contribute more to the discussion of these benefits. 

'Experts' Put in Their Place

This article by Carmel Fisher gives her opinion on the "so-called experts who are given guru or celebrity status when it is often undeserved. Experts happily provide predictions and forecasts on all manner of things, influencing the opinions and behaviour of government and business leaders, investors and society as a whole. Unfortunately, as the Economist noted recently, today's world is based on eminence rather than evidence."

Tetlock, a psychologist and professor of management at the University of Pennsylvania, lists the five lessons for those wanting to be superforecasters as:

1. Begin by gathering as much information as possible.

2. Nurture and develop the habit of thinking in terms of probabilities.

3. Consult with others to improve your odds of being correct.

4. Regularly keep score of your projections.

5. Be willing to admit error and quickly change course.

Southern Cross to Sell CIGNA Life Insurance

Southern Cross has decided to distribute life insurance to current customers. They will offer a CIGNA product, branded Southern Cross. CIGNA should be congratulated, this is an institutional distribution partner on a par with landing, say, a major bank or building society, and is one of the best known brands in New Zealand. For Southern Cross is extends their product range into a valuable area - I am sure many health insurance clients expect Southern Cross to offer life insurance and are surprised when they do not. Here is the press release: 

Not-for-profit health insurer Southern Cross is launching into the life insurance business.

It’s a natural extension for a Kiwi institution with a significant track record in looking after people says Head of Product and Marketing Chris Watney. 

“Southern Cross has been looking after the health of New Zealanders for over 55 years. We believe people will feel confident buying life insurance from an organisation and a brand they know and trust.”

Southern Cross Life Insurance is backed by specialist life insurer Cigna, and will complement Southern Cross’ range of insurance products which includes day-to-day, basic surgical and more comprehensive health insurance plans, as well as critical illness cover, travel insurance and pet insurance.

Watney believes there is a natural synergy between health insurance and life cover.

“Like health insurance, people purchase life insurance at important junctures in their life - it might be when they get a student loan, start a family, buy a home or get married.

“This is something our members have been asking of us for some time and we think the combination of both life and health products under one brand will make sense to people.”

Southern Cross Life Insurance will provide cover of up to $1 million and be available for purchase online from tomorrow.

Watney says, “We have chosen to focus on selling our life insurance online because in this busy world, people increasingly use the internet to compare and purchase insurance products. However we also have a team just a phone call away should customers want to talk to someone.”

Customers in good health will be eligible for a 10% healthy living discount. An additional discount of 10% will be available to Southern Cross Health Society members.

Note: The quotation tool and website for Southern Cross Life Insurance will be online from the 31st March.

Upfront Commission and the Cost of Marketing Insurance

If you want to buy Google ad-words related to the sale of insurance in New Zealand (and a number of other markets similar to ours) then you will find the cost is very high - among the highest you can pay for adwords. Multiply that by the number of inquiries you need to make a sale and the costs can be very high. Why?

Richard Verdin at RGA in the UK believes that upfront commission has allowed people trying to sell insurance to bid up the cost of reaching people using these search terms. Anti-commission advocates will doubtless identify this as another poor outcome from the commission model, but the opposite interpretation is also true. Commission may be high because marketing costs are high. 

While some people bemoan the idea of an insurance salesperson being paid an upfront commission for a sale "that took them just a couple of hours" if the online cost of acquisition is to be believed as a guide to the general cost of acquisition, then the picture is much altered. The effective cost that is paid - in time, effort, and shoe-leather even if you do not use Google adwords - can run to hundreds of dollars even before you have the privilege of trying to make a sale. Accounting principles usually suggest that revenue and costs should be recognised in line with the effort required to create them. 

United States: RGA Re on Group Insurance Use of Electronic Underwriting Tools

If you are frustrated at the pace of uptake of electronic underwriting in the individual market then you should consider how different New Zealand practice in the group market is from the US. RGA Re has this survey on group insurance use of electronic underwriting tools. Link

Marketing Financial Products: Consumers Refer to Many Sources

Consumers are referring to more than eight information sources before using investment products according to this post by Tony Vidler. Link. While we do not have data for the New Zealand insurance sector almost no-one believes that the decision is made on only one source of data any more. That must change the way you promote your services. Multiple promotional strategies so that your message can be found in many media are an obvious first-order conclusion. A second-order consequence is that you should consider how your message connects, contrasts, or contradicts the messages of others. Being different is eye-catching, but being completely out-of-step can make you less trust-worthy. 

More Calls for Standard (Minimum) Trauma Definitions

Sue Laing, an Australian consultant to the insurance industry has called again for minimum standards in trauma definitions in the wake of recent claims payment controversies. Link. The Association of British Insurers (ABI) had success with a campaign to lift consumer confidence in both trauma and income protection products through minimum standard definitions and standardised reporting of claims statistics. Both good territories for industry co-operation.