Southern Cross drops $60k benefit by stealth: agents
Insurance advisers are discovering that Southern Cross quietly dropped a $60,000 a year benefit for non-surgical hospitalisation without telling either advisers or Southern Cross policyholders.
Friday, September 1st 2023, 11:42AM 
10 Comments
by Jenny Ruth
While Southern Cross is within its rights to change the benefits it offers, advisers are complaining about the lack of communication and the shock their clients are experiencing at finding they don't have the cover they thought they did, just at the point when they actually need to cover.
“Whilst they have the right in the policy to change the wording, simply removing this significant benefit without advice is, I suggest, uneithical and could cause many members to be seriously affected,” says Graeme Lindsay, who provides analysis to life and health insurance agents through his firm Strategy Financial Services.
Jon-Paul Hale of Willowgrove Consulting says it is “arrogant of Southern Cross to suggest we have and know all about all the conditions” and that agents should have been aware of the changes.
“This means that their existing policyholders won't get access to treatments they expect and largely have no avenue for retribution with Southern Cross either,” Hale says.
The client who brought the change to his attention had used the benefit extensively in the past for several hospitalisations to treat a drug-resistant e-coli infection in an organ, but hadn't needed it since early 2020 when the affected organ was removed.
“Recently, they have had a change in circumstances and budget concern, so they were looking at their options and noted this benefit wasn't there and called me,” Hale says.
Both Hale and Lindsay provided Good Returns with extensive documentation of material Southern Cross sent policyholders both before and after the changes that appear to show the insurer made those changes in a stealthy manner.
No mention of dropped cover
Advice Southern Cross sent to members in November 2020 after the benefit had been dropped said:
“We're enhancing some benefits and making changes to provide more options,” the notification said.
“So that plans are easier to use, understand and compare, we've made some changes to align and simplify them,” it said.
“There are new cancer cover options for some plans, giving you more choice including access to cancer drugs not subsidised by Pharmac. Cover has been added for the latest proven new health technologies.”
The notification went on detail a number of changes, including a new benefit paying $100 a year for an annual health check, but nowhere does it say the non-surgical hospitalisation benefit had been dropped.
When Lindsay queried Southern Cross about this, the response from the company said: The Wellbeing policy wordings do not have a specific benefit for non-surgical hospitalisation cover as cover for appropriate non-surgical/medical treatments is provided across many other the other benefits within the plan.”
But Lindsay says this represents a significant reduction in cover for existing policyholders who have suffered a condition after taking out their policy and are now unable to replace the cover with another insurer.
This behaviour “smacks of very dodgy practices” and represents “a blatant serious disretgard for the impact on members,” Lindsay says.
Good Returns has asked Southern Cross about this situation and is awaiting its response.
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As an aside and considering the long-term nature of the need for medical insurance, I wonder if medical (or other life policies for that matter) with provisions allowing for unilateral policy wording changes to the detriment of existing policyholders and lives assured, are 'fit-for-purpose' within the meaning of the Consumer Guarantees Act?
Yeah, the level of communication provided gave advisers and clients no indication that anything had been removed; it was all ra ra ra, here's what they have done.
Even if you compare the before and after policy schedules, it's not an easy one to spot because you're looking for a part of the policy that is expected to be there.
It may only be a one-line thing on a benefit sheet, but it's a significant one-line.
They removed it and trying to justify why with misdirection. Much as they did with the original policy communications
The reality is there are close to 70% of people with medical coverage are insured on Southern Cross policies and many don't have the choice to move elsewhere.
That's part of the reason this is egregious and grinds my gears.
It's not about there not being better cover available, it's about the client not being able to access better cover elsewhere and having their coverage eroded by an unreasonable insurer.
The right approach here would have been to front foot it. Tell people and tell the story at the time, not bury it and hope no one notices.
The better approach, as they have done in the past, provide policy options, stay where you are pay more, drop an option and pay less.
Either of these would have been both more palatable and more acceptable, but they chose the less honorable path.
The loss of benefits isn't desirable, I also understand the drivers behind it, they have made poor choices without understanding the implications of those choices
The cynic in me wonders if this was driven by Covid and fear of the result.
In 2020 we still hadn't seen it here, but we knew it was coming eventually. Did Southern Cross management sit back and go, ‘we gotta avoid the hospital admissions we’re seeing overseas’, and pull this benefit for that reason?
If you look at the 2021 media statements about COVID support, which I helped them then when they had a Social Media attack against them. The COVID response was there, but muted. Demonstrating their concern for unbridled claims.
Pointing people at ACC for vaccine injuries and Public Health for acute care. Carefully stepping around what the policies did respond to.
The reality is, COVID didn't hit as hard here as overseas and claims didn't eventuate.
On the back of that; quietly reinstating the benefit would have been the continued “let's step around covid” thing, but they didn't do that either… as that would have been done in an update for Jan 2023 if they were playing this game…
Who knows what they were really thinking, they won't tell us and will continue to spin things as they have always done.
They do mention removing non-surgery hospitalisation in a fleeting comment that isn't covered more than stating no policyholders would be impacted. BS in that!
My client who raised this with me is one that is impacted! How many others that have not had an adviser or avenue to raise their concerns have been as well?
See for yourself; the link posted is a public one.
Product changes from about 1:04 and specifically around this change is about 1:06
The link is: https://vimeo.com/467946497/6d26617490
My comments about this being delivered without communication to policyholders, the wider adviser community, and product research providers stand.
Southern Cross removed a benefit that is expected by policyholders to be there for their future medical treatment needs and did so in an underhanded way lacking communication of the changes in a way their own policy terms and conditions expect.
I wonder if that is the needlepoint we have to get to for them to wake up that this behaviour and treatment of clients is not how we do things here.
This week, they added two treatment services to their unapproved healthcare services list. Effectively adding exclusions to existing policies.
• Intravascular Lithotripsy for Peripheral Vascular Disease
• Radiofrequency Ablation for the treatment of Morton’s Neuroma
These have been posted on a public page referenced in the Southern Cross policy wording without notice to advisers or policyholders of the change coming.
I have no idea what the claims on these are, what they cost, or how many people use them; largely, I don't care. The point is this is a change in the coverage for policyholders, and it is not notified; it has just been changed.
The issue here isn't the change; they have the right to change the policy wording with 30 days' notice. The issue here is the conduct of the insurer not meeting basic expectations the rest of us are expected to uphold and be accountable for around policy communications and changes.
This is woefully short of the basic expectations of consumers.
The cynic in me still questions this, but I don't have any evidence to the contrary after Southern Cross provided me digital copies where the metadata of the documents supports the dates of the changes.
However, the document I received from my client was the first time I have seen this document, and I canvased over a dozen clients for copies of notices and communications of the 2020/2021 changes, but not a single one had this document for their version of their cover. There are 4 versions for the 4 base plans Southern Cross has.
I received an email yesterday saying, "Oh, sorry. I thought you had these" with the above-mentioned documents. Umm, no, and back in August 2023 I had asked for copies of the communications at least three times before the first story here was written.
These documents were not available on the Southern Cross website, in a similar way to the updates posted in 2018. I even referenced the way the 2018 communication was done in my comments, and no one commented or replied that they had seen the 2020 version either.
This far down the track this leads us to the conclusion that Southern Cross thought they had communicated this, but for some reason, they didn't include the critical communication document of changes in the distribution to policyholders and the financial services market.
Despite the many times, with evidence, that Southern Cross was told something was wrong, they doubled down and dismissed the issue.
This is problematic behaviour 1. not listening to the market leads to bigger issues than they should be. A number of people, advisers, media, and research providers, all reached out to Southern Cross on this before it went public. So it's not just troublemaker J-P here.
The fact remains that while Southern Cross thought they had communicated this to the market, they didn't.
I still have challenges with the approach of "selling" the IV benefit without highlighting the removal of the non-surgical hospital benefit on the front cover communication, but Southern Cross intended to communicate this in the overall communication strategy.
Hopefully, Southern Cross has learnt from this experience to front-foot the big stuff they are changing rather than burying it in a sub-document as they had intended. Problematic Point 2.
At the same time, hopefully, Southern Cross has also learnt that when the market asks for answers on things they think they have communicated, rather than taking the approach of denial and bluster, they stop and ask some questions as to why they might be getting these questions and issues. Problematic Behaviour 3.
Did we get this wrong? No.
Did it blow up and get out of hand more than it should have? Yes.
The harsh reality for Southern Cross is that they may be the biggest medical insurer in the country, but that doesn't make them immune to mistakes or enable them to dictate that they are right. There is the fundamental underlying issue of trust with policyholders, research houses, and financial advisers.
At the end of the day, what determines how good a company is comes down to its behaviour when things don't go to plan.
To err is human; we expect mistakes to happen. At the same time, approaching the issue like Southern Cross did here destroys integrity and market trust, which is not good for retention, word-of-mouth referrals, or bottom-line perceptions of them.
I'm pleased to be able to close the loop on this with some clarity for clients when they're asking WTF?
Experience is the name everyone gives to their mistakes. — Oscar Wilde
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The additional point that needs making here is the whole industry appears to have missed it: advisers, agents, and research companies.
For this level of change to get by so many people for almost three years says more about how it was delivered and communicated than it does for the financial services industry.
Personally, I get through SX policy wordings on a regular basis, and the removal of a fundamental benefit we all consider to be a standard benefit just doesn't cross our minds for it to have disappeared without fair and reasonable notice of the changes.
But it has!
When you consider that private hospital treatment of chemotherapy, radiotherapy, dialysis and many other treatments were initially covered under this benefit, this creates a massive hole in policyholders' perception of coverage. Not to mention trust in their insurer to do the right thing by them.
We don't know what the next "chemo-type" medical development will be, but around one million insured Southern Cross members do not have access to it with the changes made!
For clarity, I do not mean experimental or unapproved treatments here; this is for treatments approved by MedSafe, funded by Pharmac, that are delivered in a hospital setting.
There is no longer coverage for these newer, but very much approved by clinical medicine, treatments on Southern Cross policies!