Surgical claims to Southern Cross Insurance were up 8% in FY24.
Surgical claims to Southern Cross Insurance were up 8% in FY24.
Southern Cross Health Insurance paid out close to $1.5 billion in claims – equal to $6 million every business day – in an “extraordinary” 2024 financial year of claims growth in volume and value, the insurer says.
The cost of claims was up 15% on FY23, while premiums increased 9%.
Membership also grew, with 15,196 net new members taking total membership to 955,301.
The steep rise in claims and the growth in membership reflected demand for private healthcare with the public system under pressure and Kiwis “prioritising” their health needs, largely in the private system, Nick Astwick, chief executive of parent organisation Southern Cross Health Society Group said.
Reasons for the 15% increase in the cost of claims included a rise in the cost of procedures and the general impact of three years of inflation, he said. Members also claimed more frequently in FY24.
“But the big, big change we’ve seen is more members using more services. We’re seeing a lot more diagnoses, more consults. We’re seeing a lot more cancer care come through and strong demand for surgical across the board.”
Members could expect a rise in their premiums to counter an increase in the cost of claims, he agreed.
The group reported a deficit of $88.2m. The claims surge contributed to this but a deficit was planned for as the organisation had kept premium increases as low as possible in the cost of living crisis, Astwick said.
Nick Astwick, chief executive Southern Cross Health Society Group.
Deficits were not unusual for member-driven organisations and only around half of the $88m was an operating deficit, he said. The balance was due to a change in international financial reporting standards. The insurer posted a combined surplus of $73.6m in the previous two financial years.
In FY24 50% of the health insurer’s members made claims, compared to 33% in 2019. The FY24 daily claim payout rate of $6m was up on $5.2m in FY23.
There were 3.2 million total claims in FY24. Surgical procedure claims were up 8% on FY23 at 316,700; specialist consultations rose 7.2% to 609,523; and GP visit claims lifted 12.4% to nudge 810,000. Prescription cover claims fell 65.6% to 213,248.
Knee replacement claims costs rose 17.1% for a total cost of $70.7m; colonoscopy value was up 17.2% for $70.2m; hip replacement 11.1% for $65.8m; and skin excisions 13.7% for $44.9m.
The 63-year-old not-for-profit is New Zealand’s biggest health insurer. Around half its total members have joined through business, with employers fully or partially subsidising private healthcare, Astwick said.
Around 70-80% of new membership was largely through business. The insurer operates with more than 2400 healthcare provider partners.
The $1.498b paid in claims was from $1.605b received in premiums. In FY23 the insurer paid out $1.3b in claims against $1.46b received in premiums.
“More than 93% of premiums were returned to our membership in claims for their private healthcare. This is the highest return in more than 10 years,” Astwick said.
Out of every dollar received in premiums 93.4c was paid in claims, compared to the industry average, excluding Southern Cross, of 73c.
Astwick said $43m of the total group deficit was due to the reported standards change introduced this financial year, and the balance of $45m was driven by the higher claims cost from a “persistently” high inflation environment combined with increased demand and partially offset by investment returns.
“The cost of claims in 2024 was steep and rapid, driven by a combination of price, volume and the mix of claims. The growth in the volume of claims results from an increase in the number of members claiming, the frequency and claims being made for more expensive procedures,” he said.
Operating costs rose 4%. The society planned to reduce its operating cost base in FY25.
Astwick said in the past five years, the society had reported an average surplus of $13m a year.
Generating a small surplus in most years was essential to ensure it had sufficient capital reserves to stay financially sustainable.
Astwick said the average age of health insurance members was relatively unchanged at around 40 years as younger members came through.
The society group comprises Southern Cross Health Insurance and its subsidiaries Southern Cross Pet Insurance, Southern Cross Travel Insurance, Southern Cross Insurance Services and Southern Cross Ventures.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
