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Tenure discount not the answer to elderly premium concerns

13 August 2012

Tenure discount not the answer to elderly premium concerns

Research conducted by Southern Cross Health Society shows that, after weighing-up the implications of a tenure discount, members signalled they would be unwilling to pay more in premiums to fund a discount for longer duration members.

This is one of the just-released findings of a comprehensive project looking into recognition of long-standing Southern Cross members.

The Member Tenure project was undertaken following a request from members concerned about the impact of rising healthcare costs on premiums for older policy holders.

The project encompassed member consultation, research, detailed data analysis and future projection modelling.

Southern Cross Chairman Graeme Hawkins said the key findings of the project demonstrated that a discount based on tenure was not equitable to members and would be unsustainable for the Society.

“As a not-for-profit insurer, a discount for long-term members would need to be funded by raising premiums for the rest of the membership. As the membership ages, this type of discount would have an increasing financial impact on those who don’t qualify.”

Mr Hawkins said the project also found that a tenure-based discount would have the effect of increasing premiums for many older members who signed up for insurance later in life.

“Not all long term members are elderly and not all elderly people are long term members. If a qualifying threshold was set at 30 years, more than half of all members aged 65 or older would not qualify. Such an approach would mean premium increases rather than decreases for many older members, which nobody wants.”

The project also found that the Society’s long-standing members already receive a “loyalty reward” of sorts through a higher average level of claims reimbursements than shorter term members.

Mr Hawkins emphasised that the project outcome did not diminish the concern long held by the Board and management about rising healthcare costs and the high cost of premiums for older members.

“We are focused on doing what we can to moderate claims cost escalation to ensure health insurance remains as affordable as possible.”

Health Society Chief Executive, Peter Tynan said, “An idea that has emerged from the project is to look at extending the current Southern Cross Low Claims Reward which allows for a 10% discount for members who are low claimers over a two year period. Extending the two year period would introduce an element of tenure recognition but would ultimately reward lower claiming members. We will explore this idea in greater detail over the coming months.

“The process had also highlighted the importance of providing for health-related costs in retirement.

“Until last year we advocated for tax rebates for older members, but Health Minister Tony Ryall has made very clear, there is simply no money at this time to fund it.

“Going forward, we’ll be talking with Government about ways to assist all New Zealanders to access private healthcare, whether through health insurance, health-specific savings, KiwiSaver or other mechanisms.”

The full report on the Member Tenure project outcomes is available at


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