Sunday, June 29, 2014

Important Health Insurance Facts from Southern Cross

Last week at the Spratt Financial offices, we received our annual presentation from higher ups at Southern Cross, New Zealand's biggest health insurance providers. Some of the facts mentioned were really interesting so we decided to share!

  • A lack of medical insurance is according to statistics the biggest contributor to mortgagee sales in the country. Mortgagee sales for those who don't know, refers to the bank or lender selling a home from underneath the owners when they are unable to make mortgage payments. Unexpected medical, surgical or health costs when someone doesn't have insurance is the main contributor to people losing their homes and that was the most shocking fact of all to us.
  • The majority of claims to Southern Cross come from those aged 65. 
  • If you drink less than 2 glasses of alcohol per day, are a non smoker and exercise 3 times per week you can receive a 10% discount on your health insurance premiums. 
  • The cost of the most common procedures used to treat the following disorders are as follows (based on Southern cross' 2012 claims data):
    - Heart Disease: $38,000 - $57,000
    - Skin Cancer: $800 - $3,900 for removal of lesions.
    - Osteoarthritis: $19,000 - $25,000
    - Prostrate Cancer: $15,000 - $21,000
    - Digestive Problems: $400 - $1,800 for Gastroscopy.
    - Breast Cancer: $7,000 - $12,000 for unilateral Mastectomy.
    - Cataracts: $3,100 - $4,700
    - Endometriosis: $6,000 - $14,000
  • For every one dollar paid to Southern Cross in premiums, Southern Cross pays back an average of 90 cents to their members in claims (based on the previous 5 years figures averaged).
  • Southern Cross has no shareholders or overseas owners. We were told this is because they would rather service New Zealanders than be beholden to any outside financial interests.
  • During the 2013 financial year, Southern Cross paid out $639.1 million in claims.
  • Southern Cross currently services 817,822 members in New Zealand.
  • In a worrying industry wide trend, Southern cross' member numbers decreased in 2013. Southern Cross numbers dropped by 0.5% compared to an overall trend in the industry of 0.7%. SC are attempting to draw attention to the negative consequences of not having medical cover (including the mortgagee sales example above) to reverse this trend.
  • Southern Cross has an A+ financial strength rating given by Standard and Poor's.

Interested in Health Insurance?  Call us on 09 307 8200 or email

Sunday, June 8, 2014

Does Generation Y need Insurance?

Today in the office, a conversation came up in which the question was raised, which type of people need insurance the most? Is it mature, middle aged men and women with steady incomes, who have already accumulated some valuable assets that need protecting? Is it older men and women, who may be facing impending medical issues in which health insurance could save them huge fees? Perhaps not many people would answer that it's Generation Y who needs insurance the most. After all, just out of school and starting their lives, they likely don't have much risk of ill health or the loss of any hugely valuable assets. They probably are renting or flatting and don't own a home, and their car might be cheap and second hand.

However, these assumptions might need revisiting. It might just be that the very fact that Generation Y (20-30 year olds) have lower assets and incomes that means they need it the most. How so? Well those with accumulated savings, assets (such as a home or business) have more options available to them if something goes wrong. They could sell the house, sell their shares in the business or fall back on life savings to keep them and their families going. Those without these assets won't have this option.

Let's say critical illness strikes. Generation Y is statistically the most likely to be living pay cheque to pay cheque. With no assets to support them, they'll likely have no way of meeting their cost of living without falling back on relatives or other forms of support that might not even be available to them. Without anything behind them, Generation Y could be one unforeseen mishap away from financial dependance or worse, having nowhere to live or being unable to afford medical treatment or surgery.

What do you think of when you think of Gen-Y? Could they have more use of insurance than older folk?

On the other hand though, living pay cheque to pay cheque doesn't leave much disposable income to spend on insurance premiums. This can make insurance seem like less of a priority. So, what they need is insurance that will protect them, without breaking the bank. Is it possible? And just what insurance should Gen-Y invest in first? We have some suggestions:

1. Health Insurance

Health Insurance should be first and foremost. If you are young enough, you may still be covered by your parents policy, but as soon as this lapses, getting health insurance of your own should be priority number one. Between the ages of 21 and 28 I've been spared more than $15,000 of medical costs because I had insurance. Plus, if you invest in it while you're young and healthy, your premiums will be as small as possible, rather than leaving it until later when pre-existing conditions may have developed, leading to increased costs and complications.

2. TPD (Total Permanent Disability Cover)

The premiums for a TPD policy tend to be much cheaper than a Trauma or Life insurance policy, and it can come in handy if you suffer an accent which renders you unable to return to your job. Since accidents and injuries may be more likely for a younger person than a critical condition diagnosis, TPD could protect you from issues Gen-Y is more likely to face, at a fraction of the cost.

3. Redundancy Cover

Similar to the above, redundancy cover is a cheaper form of income protection policy (previous articles have dealt with this form of insurance in detail), which will protect your income if you are made redundant or leave your job involuntarily. It can also cover mortgage payments if you are paying off your first home, making it a sound investment for not so high a price.

4. Life Insurance

Perhaps not as essential, but depending on your situation, it could be a very good idea. For those with no dependants relying on them and no debts, life insurance is more than likely surplus to your current requirements, but if you have a young family, debt or someone depends on your income to provide for them, life insurance for Gen-Y is a good idea. The younger you are, the cheaper your premiums will be, even moreso if you have a clean bill of health and are a non smoker. So as soon as you have people relying on you or a considerable debt to pay off, think about life insurance as a way to ensure everything is taken care of in the unfortunate event of your passing.