Southern Cross looks at loyalty rewards

Graeme Hawkins, chairman of Southern Cross Insurance. Photo / Natalie Slade

Long-standing older members of New Zealand's largest medical insurance business may soon be rewarded for their loyalty.

Southern Cross, with 825,000 members, has released its long-awaited discussion paper on reform and outlined how it is considering ways to reward loyalty, after outspoken critic Bruce Sheppard won support for his calls to reform the business at the December annual meeting in Auckland.

Changes to the business are aiming to redress complaints from members aged 65-plus about rising premium costs at a time of life when they can least afford the changes.

The society says the standard approach to insurance is that premiums reflect the risk of claims arising from a defined group of individuals and those in the 70-plus band are its highest claimers, therefore its highest payers.

But Sheppard said longest-standing members were being punished by this system.

"The pricing of membership by Southern Cross is completely commercial but also totally unfriendly," one of Sheppard's motions said.

The society has 257,271 long-standing members, 78,405 aged over 65 years.

Southern Cross has posted its 29-page discussion document online and said rising costs were one of the biggest challenges facing the organisation and its members.

"This is a complex issue and there are no easy answers. Insurers and governments all over the world are facing the same challenge," the insurer said, revealing how 31 per cent of members, equating to 257,000 people, had been with the business for 20 years or more.

The discussion document covers what is driving premium increases and what can be done about that; the society's previous investigations into loyalty discounts; premium pricing principles and cross-subsidies; financial reserves and how they are used; the future of the system with an ageing population and ageing membership.

Chief executive Peter Tynan said: "If length of membership were to be recognised in some way, we need to look closely at how it would be funded, what the implications are for all members, and for the society's long-term sustainability in such a competitive industry."

Responses to the discussion document need to be in by April 30.