Southern Cross Medical Care Society chief executive Nick Astwick had planned to be a police detective.
But when he took a short-term job at the National Bank in Christchurch after finishing his university degree, it changed the course of his life.
“I had this idea of wanting to be a policeman,” he says. “Because all my mates’ fathers were policemen, so I saw that as a leadership opportunity.”
But after he finished his commerce degree and while he was waiting to join the police, he saw a job come up at the local bank.
“It was meant to be a gap job, but it ultimately became my career job.”
Astwick moved to a product manager position in Wellington, still with National Bank.
From there, he headed to the UK, where he worked in investment banking during the boom years prior to the Global Financial Crisis.
“I headed off in 1998,” Astwick says. “I wasn’t a trader, I was working in operations. We did some really cool stuff. We did the Euro programme in 1999, which was trillions of positions that had to change in a 12-hour window, and it was only Kiwis and Aussies and South Africans silly enough to do something so crazy. So that was fun.“
From there, he moved into strategy, working on operations of the business across the globe.
But while the opportunity to stay in the UK was there, Astwick says he was always keen to come home.
“While there was cool stuff, I don’t think I heard the word customer mentioned that often. So I was quite disillusioned with investment banking. I wanted to get back to serving customers.”
When Astwick returned to New Zealand, the timing was good. Kiwibank had just been launched.
“I met Sam Knowles and Paul Brock [founding CEOs] and the bank had only just kicked off.
“I thought, as a marketer, there is no better opportunity. And I deeply believed in what Kiwibank could stand for in New Zealand, and so spent 14 years there.”
That belief took him all the way to the senior role of chief operating officer at Kiwibank, when the opportunity at Southern Cross came up in 2017.
At Southern Cross, he heads up the insurance part of the business.
“We have one brand in the New Zealand market, the Southern Cross brand, but there are fundamentally two big groups,” Astwick says.
“There’s the healthcare delivery, which is your hospitals, and then you’ve got the financial services group or the insurance group.”
It’s a massive privilege but also a massive responsibility to lead the insurance business, Astwick says.
“It’s a 64-year-old business. It’s got close to a million customers. It’s close to a $2 billion revenue business and [we did] 4.1 million claims last year.”
“So that’s 4.1 million times where we funded a healthcare service for people who are going through cancer care or getting their hips and knees done.”
Southern Cross technically has friendly society status.
“We’re fundamentally a social enterprise,” Astwick says. “What that means is our million customers are our shareholders. We are very profit-conscious, and we have to generate profits because a friendly society can’t borrow or raise capital. But we are not profit-driven.
“Fundamentally, we are there to deliver the health services our members need and to make sure that we are economically sustainable to do that for the next 50 or 60 years.”
Okay, so let’s deal with the elephant in the room: why does it feel like health insurance premiums are always rising?
That’s a question Astwick isn’t shy of tackling.
“The best way to describe that is that for every dollar of premium you pay us, 93c of that goes to pay for your healthcare. [Less than] 10c goes to pay for our operating costs.”
That’s at a high level for industry, he says.
In a higher profit-based model, for every dollar, about 73c goes to pay for healthcare and about 30c goes to costs and shareholder return, he says.
Astwick accepts the premise that premiums have risen a lot.
“If you look back over the last 20 years, they’ve been going up about 6% or 7% a year,” he says.
“Now, 70% of that price increase is our members using more healthcare services. Only 20 or 30% of that premium is because of the cost of the procedures.”
That’s why the premiums are rising faster than the Consumer Price Index, Astwick says.
So while there are cost rises around new technology and procedures, the main reason your premium is going up is that, overall, the members are using more services each year.
In particular, rising premiums present a challenge for people as they age.
After 55, they rise steeply, forcing many people to drop their cover.
“You’d be surprised to know that [out of] a million members, the average age is 40,” Astwick says.
“That’s the power of the insurance model. We need the good, healthy lives as well as the lives that need care to be funded.”
“So actually our age [profile] is not increasing each year. It’s really, really important to have a good distributed book.”
But Southern Cross does price for age, Astwick says.
“When you get from about 55 onwards, that’s when you start using health services. As a friendly society, we’ve gotta be equal to all members.”
What Southern Cross does is to pool all the members in certain age groups.
It looks at the average amount of health care that each age bracket will claim each year and prices premiums accordingly.
“So it does increase,” Astwick says. “But we have a lot of options for affordability when you’re 55 or older.”
Asked for tips on how best older people might structure their health insurance, Astwick is quick to warn that he can’t give explicit financial advice.
“But my mum was sort of getting on 70 and she said ‘I can’t afford it, Nick’.
“I said, let’s look at an excess. That halved her premium and the first $4000 a year if she needed something big, I can fund that or Mum can fund that.
“Often when you’re older, it’s the big things that happen. It’s the cancer care, it’s the hips and knees, it’s the heart.
“We had about 25,000 members put excesses in last year because of the economic environment.”
Imaging like MRI scans sits outside the excess, he adds.
That’s because it makes economic sense for Southern Cross to encourage imaging.
“We want you to get your diagnosis as fast as possible. That’s the critical thing when you look at a lot of care. The earlier you can prevent something or the earlier you can find it, that is not only good for our members, it is also good for the economics of the insurance business.”
Astwick says the biggest thing he has learned in nearly nine years at Southern Cross is the “huge resonance” that health has with people.
“We can talk about banking and other services, but health is very personal,” he says.
“I was surprised to learn that our average [lifespan] in New Zealand is 82. But actually, our health span is 70. The last 12 years of Kiwis lives are in sickness, and we’ve got to claim that back.”
“That’s ultimately what we’re trying to do at Southern Cross. We are heavily vested in shortening that 12 years. We wanna claim that back for our members.”
We talk a lot about the house being New Zealand’s number one asset, Astwick says.
“But actually, your health is your number one asset.”
Listen to the full episode to hear more from
Money Talks is a podcast run by the NZ Herald. It isn’t about personal finance and isn’t about economics – it’s just well-known New Zealanders talking about money and sharing some stories about the impact it’s had on their lives and how it has shaped them.
The series is hosted by Liam Dann, business editor-at-large for the Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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