Southern Cross pockets interest

By FRAN O'SULLIVAN and ANDREW LAXON

Southern Cross is reaping an unexpected profit by pocketing interest on an extra $15 million-$20 million it owes to customers in unpaid insurance claims.

The excess has been mounting since November when the company says it ran into trouble with the changeover to a new computer system.

But Southern Cross is not planning financial compensation for private hospitals that have faced long delays and unpaid bills of millions of dollars. One group of North Shore surgeons have paid $100,000 out of their own pockets to keep their hospital running.

Southern Cross chief executive Roger Bowie said the company would hold on to the interest - worth at least 5 per cent a year - to repay policyholders as it cleared the claims backlog.

"Our role is to get those claims processed and get the cheques in the hands of the members, so they can fulfil their obligations to the hospitals," he said.

But he could not rule out compensation to hospitals in extreme difficulties: "We are prepared to listen to whatever the hospitals say to us."

Southern Cross' public relations disaster over the computer crisis has also delayed its plans to announce premium increases expected to average between 7 per cent and 8 per cent for its 810,000 members - nearly one in five New Zealanders.

The insurer had foreshadowed a premium rate increase as early as next month but Mr Bowie said the date had not been finalised.

"We will leave that quite late until we see how we're doing. We certainly want to get the claims processing behind us," he said.

Herald inquiries have revealed that Southern Cross has experienced claims backlogs blamed on computer difficulties before.

Former managers and staff say they are concerned that the company's history of prompt settlement of claims has been lost, as even "normal" processing times have stretched from one week to three - despite the introduction of a computer system designed to speed claims through automatic processing.

The company admits waiting times have stretched to five weeks in the past two months. But dozens of emails received by the Herald from policyholders show that waiting times of up to eight weeks are not uncommon.

Several former senior managers - who spoke to the Herald on condition of anonymity - claim the company has also lost valuable institutional memory by culling too many experienced senior staff.

The company is adamant that its new Diamond system - one of the main reasons for buying Aetna - is fully functional.

Mr Bowie said the company's only mistake was in not providing enough staff and training.

Southern Cross has faced repeated criticism from customers and former staff for making almost its whole claims staff redundant by moving the department from Auckland to Hamilton last November, in the middle of the changeover.

But Mr Bowie has insisted it would have made no difference, because the staff had to be retrained on the new system anyway. He suggested that the lack of previous "baggage" among new staff could be an advantage.

Mr Bowie said the only change in bringing the system from Aetna to Southern Cross was in scale.

However, this is the first time the system has been used in New Zealand to automatically process most claims. Staff found the biggest problem was that the computer had to approve or reject all claims - which it could not do if it lacked any information - and, unlike the old system, could not be overridden by a human operator.

In the past two weeks the Herald has been flooded with stories from worried, frustrated and embarrassed Southern Cross customers. They include:* An elderly man who after major heart surgery remains worried about the debt of close to $26,000 to the private hospital that performed the surgery four months ago.* A widow who paid 19 per cent interest on a $1700 bill she paid on her credit card, and has just been reimbursed by Southern Cross after her mid-November operation.* An Auckland woman who says she is "beside herself" because of a two-month delay in a $5000 claim for surgery.* An Auckland couple who are long-time Southern Cross members and are owed several thousand dollars after they paid for their private medical care.

Full coverage:
nzherald.co.nz/southerncross