Standard definitions might not be silver bullet

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[UPDATED] New Zealand insurers say standard trauma definitions could end up costing consumers.

Thursday, April 14th 2016, 3:33PM 1 Comment

by Susan Edmunds

Natalie Cameron

Trauma policies have become more expensive over the years as insurers expanded their lists of qualifying conditions and in some cases made it easier for customers to claim on their policies.

Insurers' views can vary on what constitutes a health event that will trigger a trauma claim.

The insurance definition of a condition such as a heart attack can vary and trauma policies have a level of complexity that makes them hard for some consumers to understand.

That has led for calls for standardisation of how insurers judge health conditions and what will generate a payout.

But Natalie Cameron, chief executive of AIA in New Zealand, was not sure it would work.

"I can see the benefit of making insurance more standard and simple for consumers, so they can always expect the same definitions.  There is no question that insurance wording is complex for anyone to understand, which is where getting good advice is so important.  And we should, as an industry, work on simplifying our language.  However, sometimes consumers have different needs and ability to afford cover, and may want their adviser to be able to offer different options," she said.

"I am also not sure that removing competition between insurers, in terms of product wording, is the best thing for consumers in the long run.  Insurers should always be working to make their products and pricing better, and more able to meet the real needs of the consumer.  Competition in the product space is healthy and should ultimately result in better outcomes for consumers."

Naomi Ballantyne, of Partners Life, said standard definitions would come with standard claims risk and therefore standard pricing.

"One of the issues I have with the way these trauma things have been reported is that if you bought a trauma policy, let's say, 15 years ago and it had the three main things covered but they were more severe definitions so they actually made a difference to you as opposed to some of the cancer definitions now where you can get paid for things that aren't going to make any difference at all to your life, it's like a Lotto win, but there's a cost for that. The older policies that didn't have those more lenient definitions are much cheaper."

She said if everyone was to have the full suite of definitions it would be more expensive and some people might end up with less cover. "It truly is a cost benefit analysis. That's what advisers do. If you want these wordings this is the price but if you don't want to spend that much money or you're not worried about those things, here's the alternative and here's the alternative price.

"Not all restricted trauma is cheaper, that's also a problem, but that's what an adviser is there to do. If they come across someone with an old-style trauma policy but paying way more, their job is to replace it."

But Rob Hennin, of nib, was supportive of the idea. "Improving the transparency of information and terminology when it comes to health is a significant opportunity not just for New Zealanders but our entire health system. Introducing standardised trauma definitions would greatly improve people's understanding of healthcare treatment, leading to better choices, better health outcomes and greater efficiency."

Tags: AIA Partners Life

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