Sovereign launches NZ's first severity-based insurance product and opens up possibility for multiple claims against one policy

by Craig Simpson

In a first for New Zealand, local insurer Sovereign has launched 'Progressive Care' a new generation trauma insurance product which pays a lump-sum(s) based on the severity of your diagnosis across 62 pre-defined medical condition.

These 62 conditions are broken down into five broad categories: Heart and Arteries, Cancer, Brain and Nerves, Loss of Function and Other health events. Each 'bucket' of conditions has a varying degree of severity associated with it. Depending on the seriousness of your condition you could receive 10%, 25%, 50%, 75% or 100% of the sum assured, subject to any previous claims made under the policy (of course).

While Sovereign are market leaders in New Zealand, these types of policies have be in existence overseas for the past decade and more recently they have been available in Australia.

What exactly is Trauma insurance?

Trauma insurance is also referred to as “critical illness” cover and pays a lump-sum, tax free benefit on diagnosis of one of a specified range of medical conditions or accidents. This lump-sum payment will help make up for any loss of earnings, including that of your spouse or partner who has to take time off work to look after you, meet expenses for treatment and clear debt which could potential cripple your finances.

In 2011 the ISI Underinsurance survey concluded that 57% of New Zealanders would experience some financial hardship if the first income earner suffers a long-term illness.

Normally, trauma insurance it is not designed to cover the cost of treatment but rather the associated costs of rehabilitation.

Many traditional polices only cover a limited range of the major conditions, like heart attacks, cancer, stroke, coronary artery bypass surgery, and severe injuries resulting in paraplegia, blindness or severe burns.

Underwriting considerations are generally similar to those for medical insurance. These are not linked to income so are useful for non-earners as a substitute for income protection, and to complement ACC cover.

What makes the Sovereign product different to standard trauma cover?

Traditional trauma insurance is an all or nothing product which just provides a lump-sum when you're critically ill. Sovereign's Progressive Care on the other hand, allows for multiple payments over the life of the policy and comes into force at the point of diagnosis.

Another advantage for policy holders is that you can make extra claims if your condition gets worse; if you suffer from a more severe, related condition; or you suffer from a new condition.

Having five different buckets allows you access to effectively five products for the cost of one. The sum assured is the same for each of the five categories so theoretically someone with $200,000 sum assured is in fact accessing $1 million worth of cover. You would have to be incredibly unlucky to claim the full benefit.

Cover remains in place for life even after a claim and the sum assured for a specific category decreases by the amount of the payment leaving a residual balance. This means policy holders are eligible to make subsequent claims over the lifetime of their cover under each of five Categories of Conditions (unless the sum assured for that category is exhausted).

Sovereign's policy has an additional add-on benefit which gives you the freedom to select the best specialist available and to avoid long waiting times for essential treatment. This additional add-on provides access to 'Best Doctors', a global network of over 50,000 leading medical specialists.

This unique service offers three levels of personalised specialist medical advice. Whether you need a second opinion on your diagnosis or treatment, or have a simple medical question about a current health concern, leading medical specialists from New Zealand and around the world are there to help.

We understand on average Sovereign's new generation product is 25% cheaper than traditional trauma policies, and could be substantially cheaper than this in some instances.

Don't think Trauma insurance is important?

Many people insure their cars, home, contents and lives but forget about their truly major asset, their ability to earn an income. This type of insurance forms part of a sound risk management plan and provides both economic and rehabilitation or recovery benefits.

The economic benefits are fairly obvious as it means you do not have to rely on using up your sick leave, annual leave or cashing in assets. Rehabilitation or recovery benefits revolve around proving you the time and space to be able to recover from the traumatic event without worrying about the financial stress you could be put under. 

Some more food for thought....

• Every day there are 57 new cancer cases registered and 23 deaths from cancer in New Zealand - that is 20,805 registrations and 8,395 deaths per annum from cancer.

• Over 3,300 New Zealand men are diagnosed with prostate cancer each year according to the Ministry of Health.

• Every year around 2,800 New Zealand women and 20 men are diagnosed with breast cancer.

• In New Zealand around 22 people die each week from bowel cancer (that is 1,144 each year).

• Every day roughly 21 New Zealanders (approx 7,665 per year) suffer a stroke with 25% of these (roughly 1,900) being people aged under 65. Stokes are seen as the major cause of adult disability in New Zealand. The Stoke Foundation of New Zealand estimates there are 60,000 stroke survivors in New Zealand. Many stroke victims require daily support and are unable to return to their previous jobs.

• If you are aged 25 - 44 melanoma is the most common cancer registration in males and breast cancer for females.

• Leading causes of trauma claims in 2012 were for cancer (63%) and heart disease (29%).

• The most common type of cancer in those aged 21 and younger is leukemia

As with any major financial decision it is important to seek advice appropriate for your personal circumstance.