Sovereign trumps Southern Cross providing better value for money for its health insurance

Sovereign trumps Southern Cross providing better value for money for its health insurance

The country’s leading health insurance provider, Southern Cross, is being outdone by its competitors when it comes to offering value for money.

Interest.co.nz has compared premium costs and health cover between seven insurers for a single, childless, non-smoking woman, aged 25, 35, 45, and 55.

Southern Cross Health Society has higher premiums and less comprehensive coverage than other insurers.

The findings are part of a new series, comparing what you pay and what you get for different types of insurance at various insurers.  

In this case study, Accuro proved the cheapest when averaging monthly premiums across all the ages, and excesses of $500 and $1000.

Premium costs per month ($)
Excess $500 | $1000
Age (years) 25 35 45 55 |
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25 35 45 55
     
Accuro 49.18 61.11 87.54 137.32 43.19 53.80 77.15 120.83
AIA 66.26 75.82 97.73 155.30 64.31 73.54 94.71 150.30
NIB 62.40 75.38 91.33 155.90 56.31 65.67 82.18 141.19
ANZ-OnePath 78.15 85.12 113.99 172.74 66.99 76.16 101.75 156.84
Partners Life 72.99 78.22 103.74 158.33 66.49 71.18 94.08 143.03
Southern Cross 59.15 75.92 107.87 163.04 52.20 66.98 75.18 143.86
Sovereign 68.04 73.61 99.18 152.43 61.64 66.65 89.62 137.49

Accuro's average premium is $78.77, compared to $93.03 at Southern Cross and $106.47 at ANZ-OnePath – the most expensive insurer.

Accuro also provides the second most comprehensive cover, behind Partners Life, while Southern Cross (also a not-for-profit organisation like Accuro) provides by far the weakest.

Accuro offers surgical cover of up to $300,000 per annum, non-surgical cover of up to $200,000 pa, cover in Australia to the same level as in New Zealand, and cover of up to $30,000 pa for overseas treatment.

Southern Cross on the other hand offers surgical cover of up to $100,000 per operation, non-surgical cover of up to $60,000 pa, no special cover for when you’re in Australia, and cover of up to $10,000 pa for overseas treatment.

But there’s a catch.

With a B rating, Accuro has the lowest financial strength rating (measured by credit rating agency AM Best). Southern Cross has a higher rating of A+ (from Standard and Poor’s). (See credit ratings explained here).

Accuro, which started in 1971 as a health insurer for health professionals, has a solvency ratio of 2.70, while Southern Cross has one of 5.25. The solvency ratio is calculated by dividing the actual solvency capital by the minimum solvency capital required by the Reserve Bank. (There's more detail at the Reserve Bank's website here).

ANZ-OnePath provides comprehensive cover and has the top financial strength rating AA- (Standard and Poor's). You may be paying more for the convenience of dealing with the same institution for both your banking and insurance needs.

Cover
[click for policy docs] Accuro AIA NIB ANZ
OnePath
Partners
Life
Southern
Cross
Sovereign
               
Surgical cover, pa $300,000 $200,000 $300,000 $200,000 $300,000

$100,000
per operation

$300,000
Specialists & Tests yes yes yes yes yes yes yes
Non-surgical cover, pa $200,000 $100,000 $200,000 $200,000 $300,000 $60,000 $300,000
Major diagnostics yes yes yes yes yes yes yes
Non-Pharmac cover yes no yes yes yes limited yes
Australia cover to NZ level to 50% of NZ to 75% of NZ to NZ level to NZ level none to NZ level
Overseas treatment to $30K/yr to $25K/yr to $30k/
treatment
to $30K/yr to $30K/yr to $10K/yr to $30K/yr
               
Financial strength B
AM Best
AA-
S&P
A-
AM Best
AA-
S&P
B++
AM Best
A+
S&P
A+
AM Best

Sovereign is the insurer that provides the most comprehensive cover at prices that are among the lowest. It also has a financial strength rating of A+ (AM Best).

The average monthly premium across all the age bands and two levels of excesses is $93.58.

Sovereign offers surgical and non-surgical cover of up to $300,000 pa, cover in Australia to the same level as in New Zealand, and cover of up to $30,000 pa for overseas treatment.

Accuro’s premiums escalate the most between ages 25 and 55, followed by Southern Cross. The average percentage increases across excesses of $500 and $1000 are 179% and 176%, respectively.

At the other end of the spectrum, the increase at Partners Life is 116% and Sovereign 124%.

Case study 
Gender  Female
Marital status Single
Ages 25, 35, 45, 55
Children  No
Smoker  No

Note: These premium costs were sourced from www.lifedirect.co.nz on March 1, 2015 and are subject to change. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Onepath does not have the highest credit rating; Sovereign does. See http://www.ambest.com/ratings/guide.asp
I strongly disagree with the authors comment that Sovereign provides the best cover. It's a gross overstatement to say that Sovereign covers Non-Pharmac drugs. If you check the policy wording it says:
"Chemotherapy treatment provided by a registered medical specialistin an approved facility. Includes the cost of materials, hospitalaccommodation and ancillary hospital charges. Includes the cost of Pharmac and non-Pharmac approved MedSafe indicated chemotherapydrugs, subject to Sovereign criteria. Prior approval must be obtained before the procedure takes place."
Pretty self explanatory; only covers them for Chemotherapy. All other companies that provide this cover cover it for any reason. 
There are also some other key differences that have been overlooked in terms of some of these companies offer guaranteed policy wordings (while others can change them whenver they like). 
Also, if you bundle health insurance with a client's life and or/income protection needs then a discount of around 15% applies to their health insurance with some companies. This can really jumble up who's the most cost effective. 
There are also other things to think about in terms of cover for pre-existing conditions.
I think it's great that interest.co.nz is trying to run these stories on insurance but you really should have them written by insurance professionals as these products are far too complex for a journalist to summarise in this way. 

Well spotted on the non pharmac drugs. Many non pharmac cancer drugs may not be medisafe approved as they would be too new. The reality is with cancer drugs is that if the proven ones have failed then you don't have a lot to lose by giving the new drugs a try (Even the ones that are approved have a list of side effects which are nasty. The ones I got kill about 1% of people). Medisafe will have a higher threashold in order to rule it safe. Brentuximab Vedotin is a new drug of Hodgkin's Lymphoma and is very expensive and not approved or funded. So in that case, your insurance is useless. Going overseas for treatment could be an option if you were able to fly and your insurance would cover the cost but cover is likely to be short.
The real issue is health insurance is incredibly complicated compared to other types of insurance. It is something I now find incredibly frustrating and would really like to help find a way to simplify it. I do think some of the insurance companies put in benefits that they know most people will think are great but when they come to claim the company will agree to pay but the service won't be available to pay for privately.

Yes as an insurance adviser I'd say be careful what you advise here, but all in a all a good start...
Most insurers have more than one plan (a cheap and nasty version and a comprehensive version) so is this what's quoted under 'average premiums'?
Also credit ratings are important but not all that relevant in a lot of cases - what could be of more importance is do they have adequate re-insurance (AMI didn't have enough)...do they offer a range of insurances to spread out the losses they make on their medical book...are they NZ owned? (important to some not not necessarily others)...
I'd suggest this has story has been offerred by an insurer to print, not by an independent source - a slippery slope...but a good attempt anyway...
 
 

Due to ACC, medical insurers are less likely to suffer the issues that general insures did and a result of the earthquakes etc.
How do you advise your clients on selecting health insurance? You got to a website like lifedirect and you get the comparision table like the one in this article and on face value it does a good comparison however if you dig a little deeper the fine print makes a huge difference. I expect you would need a high level of medical knowledge.
 

Hi Kevin, 
Thank you for your comments - you raise some excellent points.
I would just like to clarify the story hasn't been offered to us by an insurer. Rather we have sourced the data from www.lifedirect.co.nz - a publicly available source. 
I appreciate there is much more to comparing different types of insurance cover than we have scope to discuss in an article, but the idea is to give readers a snapshot of what you get for what you pay, and evoke some discussion. 
Those who would like to dig into a little more detail, can click on the links in the 'Cover' table to read individual policy documents. 

This is a great topic.There is a correction to report and that is Southern Cross pay up to $100k per surgery, not per year. Effectively this covers most procedures which you could recieve privately.  If you need a heart transplant, it is unlikely you could get it performed privately. Another example of this is cancer cover. Private access to cancer treatment is limited in NZ so you may get $100,000 pa worth of cover but nowhere to spend it. The non pharmac drugs on face value looks very appealing however they have to be medisafe approved which may rule out new cancer medicines etc which are very expensive and the level of testing may not be a riggorous as it would be for less serious ailments. I'm not saying there is no merit in having this cover, but people need to be aware of what they are actually paying for.
The other thing to note is that travel insurance would normally take care of medical issues while you are there on a short term basis (work or holiday).

I have had the misfortune of getting cancer and going through the private system until diagnosis and then moved over to the public system for treatment. Private treatment wasn't available. Southern Cross paid for all the tests etc and I find it imposible to fault them. Their limits on what they would pay for a test was always inline with the actual costs. The good news is the public system took care of it.
I have looked at some other policies from different providers and sometimes the limits do not cover the actual cost even though they say they pay 100% up to a limit. The problem for the average person is that you don't really know what the cost of each procedure you might need is. I have seen policies that pay up to $175 per specialist visit. I haven't been changed less than $320 per visit, the highest being $460.
I'm a big fan of having health insurance but it is important that you are aware of what you are covered for. I also think Southern Cross got a bad review and it is a little unfair. I am sure there are other providers which are also very good. OnePath looked like they had some decent plans and have heard good things about them too.
 

Hi Dave,
Thank you for picking up my mistake around Southern Cross's surgical cover. I have amended the story accordingly. 
Appreciate your feedback and comments on the issues.

No problem. It is a really good topic for discussion. Trying to make sense of the differences is difficult 

You make some excellent points DaveB1978 - sometimes you are actually better off in the public system as they have better equipment and more specilaists floating around if anything goes wrong. Many private hospitals basically shut down over the weekend - not great if you're lying there and have a problem. Many specialists work both the public and private sector so it's not as you're necessarily getting better quality specialists or care privately...
There are thousands of medsafe approved drugs - only a portion are pharmac subsidised...  
My wife has had many surgeries, some public, some private and if it can be done privately it's great - your own your room, own bathroom, nurses are nice to you and not so stressed etc..
Southern Cross are OK usually but I have seen many instatnces of short falls at claim time - .and I'd hate to be a woman being unfortune enough to get breast cancer and needing a double mastectomy...
Partners Life in my opinion...
Cheers

Thanks Kevin, 
It is so complicated that it is hard to compare different providers. If provider A pays $60k for a treatment and provider by B plays $600k for the same treatment and there isn't anywhere you can get the treatment privately, which one is better? It is like buying a completely blind person a bigger TV.
I have done well with southern cross. No claims have been declined and prior approval has been as simple as it could be. All my expenses have been paid in full. I won't get insurance from anyone else now so shopping around is not an option for me. It does however highlight the importance of getting the right insurance before you need it. It isn't like other insurances where you can change without too much downside.
The key benefits of private health insurance are that you often get elective surgery done much quicker and in a nicer environment. It also helps if you need a lot of diagnostic tests. You can often get them much quicker privately.

Hi Kevin I just read your comments re health insurance and they made sense. I'm looking for an insurance broker to help me with our health insurance needs. How can I contact you? Many thanks. This is a great discussion with more helpful info than most other sites.

I think excesses on health insurance should be avoided. Leave out GP's etc to save on premiums but having an excess is potentially problematic. It is unlikely that your house will burn down 3 times in a month but with health insurance it is very posible that you will have multiple claims in a short period of time. You might get sent for an Ultrasound ($300), A CT scan ($1200), an Ultrasound guided biopsy ($700), 2 different specialists at $320 and $460 respecitively and a surgical biopsy for $7000 in the space of 2-3 months. If you have an excess of $1000 you would get $6200 paid and have to fork out nearly $3000 yourself.
If you don't have the money to pay the excesses then you can't use your insurance and if you do then you could have easily afforded the extra few dollars a month to not have one. Another point here is that your ability to work while this is happening could be limited also.
 

Most companies excesses are per policy year not per 'event'. For example I have Partners Life Health Insurance with a $500 excess. The most I will pay in any policy year is $500 regardless of how many 'events' happen. 
 

It isn't all that clear how that works from the lifedirect site. This their explaination of how the excess works "If the medical bill is $5000 and your excess is $250 you pay $250 and the insurer pays $4750". Having looked up Southern Cross's policy, it works as you suggest in their case at least.  I have no exess so it doesn't affect me. Life direct could do a better job in describing the policy if it fact all have the same rules. Adding 'you only pay a maximum one excess per year' would help.

Hi Dave - Conor from LifeDirect here. I think you raise a really good point - we could add more detail to our comparison to describe how each insurer approaches the excess (there is a lot of variation - per year, per treatment, and in some cases per benefit you're claiming under. And it gets even more complex when you extend cover to include specialists and tests). Our current description was really designed more to answer the general question "What is an excess?" (many people don't understand the concept at all) rather than the question "How does each specific insurer apply their excess?". That would be a really good addition - we'll look at doing that. 

It is a very complicated subject. The more you guys can do to help people understand the differences and make informed decisions the better. What you have already is better than going to each insurers site.

Agreed - it's confusing and often hard to compare 'apples with apples'...I'm sure the insurers like it that way...add to that the direct companies who advertise on TV, internet etc and people can easily end up with the wrong sort of plan that won't pay out when they need it...
As hfitzgerald points out usually the excess if only payable once per year and if a group of tests/surgery is all relating to one claim then you usually only pay the excess once...
The number one golden rule is if you have pre-existing medical conditions think wisely before jumping ship to a new insurer...especially if it's something that may well lead to issues later on...
 
 

There is one issue that I would like insurance companies to address.  That is the boundary between ACC and themselves.  I have heard of a number of cases where a person has an injury or condition arising from one where ACC will not pay or delay unacceptably; however because it has an ACC component the insurers will not pay either.  They end up in no mans land continuing to suffer and possibly harming themselves further while the issue may or may not be resolved.  Why can't the insurers pay out for timely treatment and argue the point with the ACC to recover costs as per vehicle insurance.  With this up front approach they may save themselves a lot of money because when faced with the possibility of this situation, patients, often on the advice of their doctors will not even start the ACC process and make an insurance claim on their policy instead. 
The insurance companies are far better equiped for arguing with the ACC and I would expect that the boundaries would be quickly sorted rather than going through endless court cases.

This is always going to be a problem as premimums are set based on ACC taking care of accidents etc. I wonder whether an extension of the ACC model to take care of medical is a good idea. It would also take care of sickness benefits etc. It is a huge change but I think it has merit. I see it working a bit like kiwisaver providers. ACC would be the default one and others would be able to offer it also. They would have to provide the same or more than ACC. The ACC levy would have to go up and income taxes would have to go down. I makes it possible to open up the market to competition however it still has ACC to keep the rest honest.
It also makes it fairer for people that already purchase private health insurance. If everyone cancelled their pocilies and just relied on the public health system, it wouldn't be pretty.
 
 

This is always going to be a problem as premimums are set based on ACC taking care of accidents etc. I wonder whether an extension of the ACC model to take care of medical is a good idea. It would also take care of sickness benefits etc. It is a huge change but I think it has merit. I see it working a bit like kiwisaver providers. ACC would be the default one and others would be able to offer it also. They would have to provide the same or more than ACC. The ACC levy would have to go up and income taxes would have to go down. I makes it possible to open up the market to competition however it still has ACC to keep the rest honest.
It also makes it fairer for people that already purchase private health insurance. If everyone cancelled their pocilies and just relied on the public health system, it wouldn't be pretty.
 
 

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