By KATHERINE HOBY
Southern Cross members face premium rises of about 16 per cent in the middle of this year.
An independent review has found that the troubled health insurer is financially sound but that underwriting losses mean a rise in premiums is "imperative".
Further rises are in the pipeline.
Southern Cross audit committee chairman and board spokesman Bryan Kensington expected price increases of between 16 and 17 per cent on average.
A 16 per cent increase would add about $35 a year to the premium for an adult on a KiwiCare company scheme. For a family of two adults and one child with a RegularCare group policy, the annual increase would be about $120.
"It's a bit of a guess at this stage. It's the sort of area we are talking about.
"I would expect no one is going to be happy about it. On the other hand I think most members realise premiums are driven by claims. It's just a function of the number of procedures our members are having," Mr Kensington said.
Other insurance companies had announced price increases of between 3 and 27 per cent, he said.
Last February, Southern Cross increased premiums up to 30 per cent for its 311,600 policyholders aged over 45.
The review, commissioned by Southern Cross, was conducted by PricewaterhouseCoopers after thousands of claims were delayed.
"Southern Cross is experiencing underwriting losses, reflecting the fact that the combination of claims expenses and operating overheads is exceeding the current level of premium income," it said.
The review states that without the increase the company's reserves could be eroded to a point at which paying out claims could jeopardise its long-term financial health.
The review confirmed that system problems caused claim delays.
"The current difficulties that Southern Cross has experienced with timely claims processing are attributable to systems deficiencies and do not reflect any ability to pay such claims," the review said.
Mr Kensington released the key findings yesterday but much of the report was withheld because it contained commercially sensitive information.
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