Fusion claims market leadership

By Richard Braddell

WELLINGTON - Fusion Insurance, the joint venture between Southern Cross and Royal & Sunalliance, says it has become the largest player in the new workplace insurance market, with 38 per cent of the premiums.

Southern Cross, in its annual report this week, also said it took a 51 per cent share in the third part of the Fusion alliance, the workplace safety and rehabilitation manager GMV Associates.

Far and away New Zealand's largest health insurer, not-for-profit Southern Cross reported a $17 million surplus for the year ended June, just over half the figure for the same period in 1998.

Had it not been for investment income, the surplus would have been a loss, after an operating and underwriting deficit of $8.8 million reversed an equivalent surplus of $6.6 million in 1998.

However, Southern Cross chief executive Roger Bowie said the health insurance market had entered a more predictable period in terms of "risk shifting" from the public sector. Costs had previously soared as the private sector shouldered more services previously funded out of the public purse.

"After three turbulent years of surging demand for elective surgery in the private sector, the market appears to have reached a new equilibrium between public and private, albeit a very fragile one," Mr Bowie said.

Higher, but fewer, individual claims reflected a move to more surgical-only plans.

Membership, which had declined in line with the market, has stabilised with help from claims experience discounts.

Gross revenue of $339 million was comparable with 1998, but slipped to $327 million after discounts were taken into account.

Claims, at $299 million, were little-changed, but operating expenses of $36.5 million were $3 million higher.

Mr Bowie declined to say how much was paid for the 51 per cent stake in GMV, whose founder and managing director is Wellington businesswoman Melissa Clark-Reynolds.

Nor could he give a figure for the actual premium income Fusion had captured. But in gaining more than a third of the privately placed share of the market, Fusion issued around 50,000 policies.

Southern Cross has justified the $2 million Fusion outlay on the growth opportunities and the extension of competencies in risk management, healthcare promotion and injury and sickness prevention.

Despite a small loss on the start-up, Southern Cross expects Fusion to contribute to earnings in future years.