Health insurance premium increases are hurting New Zealand customers and insurers are asking the government to help find solutions, AIA New Zealand chief executive Nick Stanhope says.
New Zealand’s health insurance inflation is among the highest in the Asia-Pacific region. AIA NZ CEO Nick Stanhope says the affordability pressures require fresh thinking from both insurers and policymakers.
This could come in the form of smarter products, a better understanding of underlying health trends, and potentially Australian-style tax deductibility for health insurance.
AIA NZ has met with Health Minister Simeon Brown twice this year - first a one-on-one meeting in June, and then in August as part of the FSC’s CEO Forum. Stanhope says the meetings were promising.
“I was very impressed with Minister Brown,” Stanhope told Good Returns.
“I think he was thoughtful, listened to what we had to say and took notes. We’ve got good data, and we’re looking at the types of illnesses people are getting, age groups, etc. We’re asking the government to focus on areas where there is high-cost inflation and to get to the root of it.”
“The cost of premium increases is a concern to all of us - not just for AIA, but for all insurers,” he added.
“That does require some degree of government involvement. Politicians need to have the right conversations and find out why inflation in the provision of medical services is so high relative to even Australia.”
Tax reform on the table
AIA has also raised the issue of fringe benefit tax on group health schemes with the government. Currently employers who provide healthcare to staff face a 49% penalty on top of the premium they pay.
Stanhope has met with Revenue Minister Simon Watts and Prime Minister Christopher Luxon to discuss the issue. He says it's now on their list for consideration, which it hasn’t been in the past.
The Australian model is another useful comparison. Tax deductibility there has created significant capital investment in hospitals and a stronger public-private healthcare relationship.
“We think it would be a good thing all-round,” Stanhope said. “Australia proves that. And because health insurance is such a big market there, they don’t have age-related pricing. In New Zealand, the prices are rate-for-age which makes the affordability question more complicated.”
Low-cost product approaches
Insurers have taken different approaches so far. All major insurers have raised premiums, nib introduced co-pays on some diagnostics, and AIA has rolled out some lower-cost options with fewer benefits.
These included a $10,000 excess option on private health, designed to offer cover for big events, as well as specific specialist & testing and cancer care products.
Stanhope says the thinking is that some level of cover is better than nothing.
“Cancer Care is 60-70% cheaper than our private health full product,” he explained. “Knowing that one in three New Zealanders gets cancer at some point in their life, having some degree of protection and a private alternative to the public sector is valuable.”
He says the biggest issue is still rising claim numbers. He noted that the last few years have been ‘terrible’ for claims all-round, particularly as the time it takes to see a specialist in the public system is increasing.
Wait times have stretched to six to 12 months to see a specialist, which Stanhope calls unacceptable.
“Imagine the anxiety of having an event you’re concerned about, and having to wait that long to find out what it is, and what the treatment path might be,” he said. “That’s something that isn’t good for New Zealand, and we made that comment to Minister Brown and provided some data on wait times.”
Adviser support still crucial
Advisers have had to break a lot of difficult news this year, navigating cost-of-living challenges with clients and helping them maintain appropriate cover where possible.
For clients considering cancelling policies altogether, Stanhope says one approach he's seen work well is encouraging clients to get a health check first.
“If you’re going to do it, know your health,” he says. “Some advisers have had clients getting those health checks and finding they have cancerous lesions, or something else they’ve been unaware of.”
“Then of course, explore options like Cancer Care and Specialist & Testing,” he adds. “You can reduce benefits, or support it with another product. We know that adapting products to a customer’s budget is something advisers are very good at.”
Search
