John Williamson: Better to have insurance than to not have it and need it

Insurance helps ease John Williamson's worries about the financial consequences for his family in a worst-case scenario.

OPINION

Our fence became a victim again a couple of months ago. This is the second time in 30 months that a car has taken out the fence and street lamp. This time it was 9.30pm on a Sunday and there is evidence of a bit of speed involved. There must have been a helluva bang.

Last week, the female driver pleaded guilty and was convicted of possession of a utensil for cannabis, and the driver’s blood had listed qualifying drugs over high-risk levels. I presume that is drugged driving.

Curiously, a charge of driving a motor vehicle in a dangerous manner was withdrawn by leave. The driver was disqualified from driving for six months, ordered to attend a drugged-driving course and ordered to pay reparation of $550. The latter is the excess on our insurance policy.

Given the nature of the conviction, it seems highly unlikely that the driver would be able to claim insurance, even if insurance existed. Then there’s the likely write-off of the car, the cost of our fence and the cost to the council of a new street lamp. We’ll be waiting a while for our reparation, I suspect.

The question of insurance has come up in a couple of conversations recently, most particularly about health and pet insurance. We have been longtime holders of health insurance policies and I have had some recent involvement with the private health system. Over the past six years, two total knee replacements, a total hip replacement and last week a hiatus hernia repair, along with the various diagnostic tests and consultations, have created a quite significant involvement with our health insurer.

The annual premium, though, is eye-watering for people our age at around $200 a week for the pair of us. That’s the equivalent of our weekly grocery bill. Still, all the aforementioned procedures are elective and we don’t have to wait on the public system. According to one study, the average time from first GP referral to having surgery is 224 days in the public system. I suspect that is an old study.

I am aware of people taking out reverse mortgages of $35,000 for a total knee replacement as the pain became unbearable while waiting on the public system.

It is interesting that we place a priority on insuring our houses, cars and personal effects but only 38% of New Zealanders have private health insurance. Research shows the main reason we invest in private health insurance are: peace of mind; to reduce stress; it’s a financially responsible thing to do; and personally, because I worry about the financial consequences for my family if I had a serious health event.

Southern Cross, our insurer, is a not-for-profit organisation and pays out about 86 cents of every dollar premium. In 2002 that amounted to $1.08 billion. This might otherwise be a charge on the public system, which is already under significant cost pressure.

The top claims by cost on the private system are: initial specialist consultations, total hip replacement, colonoscopy, total knee replacement and MRI scan. I have had all of those in the past two years.

There is real pressure within the industry for cancer treatments and these are not elective. Givealittle pages proliferate with appeals on behalf of those who have had surprise and devastating diagnoses. As more drugs become available, the demand for them will increase.

The insurance industry is always looking for new ways to insure the things we value and pet insurance is one of those. This week we had a conversation with a couple: “We have a 3-year-old dog and have had pet insurance. Looking at our costs, we cancelled the insurance. Three weeks later, the dog needed a major operation, the cost of which would have covered pet insurance for the rest of her life.”

The alternative to the operation was unthinkable.

There’s an old adage: better to have insurance and not need it than to need it and not have it. At least the cost of our new fence was covered by our insurance. There’s some peace of mind that comes with that.