Both claims and premiums increased in the 2013 financial year for the country’s largest health insurer.

Southern Cross Medical Care Society earned $725.5 million in premiums, up 2.6% on 2012, and incurred $639.1 million in claims, up 5.5%.

Chief executive Peter Tynan said that meant that for every dollar received in premium income, more than 88 cents was returned to members in claims.

Despite that, the annual surplus for the year was within the budgeted range - at $22.1 million. 

He said the health insurance market was struggling to attract new customers. Over the past year the health insurance sector as a whole saw a small decline of 0.7% in the number of New Zealanders with health insurance. 

The society reported a decrease of 0.5%.  Its market share increased slightly from 61% to 61.1%. It ended the financial year with 817,822 members.

Southern Cross has a large corporate book and Tynan said the rate at which employees moved between companies had slowed. Every time someone moved on from a job, it gave Southern Cross two opportunities: The chance to move them on to an individual contract and to sign up the person who took over in the role. 

“That has slowed and there are some redundancies floating through the system. We try to retain all of those people on individual contracts after that but there isn’t someone coming in to sit in the chair.”

He said there was an opportunity in the small-to-medium business sector and among young people. “They are hard to get to but we’re going to try to do that over the next 12 months.”

But he said Southern Cross’ model was sustainable. It has grown its membership base over the past 10 years by about 30,000. Changes to fire and general insurance policies had prompted some organisations to review their insurances, which created opportunities.

The key issue was to keep premiums at a moderate level, he said. Southern Cross is trying to do that by striking agreements with affiliated providers on agreed rates for procedures.

It is also offer more digital access for customers and streamlining processes to cut down paperwork.

At year end, the society’s reserves sat at $395.4 million. This is equivalent to about seven months’ worth of claims and is within the target solvency range established by the board.

Tynan said:  “These reserves have helped the society maintain its A+ financial strength rating from Standard and Poor’s, for the 11th consecutive year. The society is operating in a sound and sustainable manner to ensure that it will meet members’ healthcare funding needs in years to come.”

He said brokers would continue to play a large role in the provision of health insurance. He said the industry had undergone a rapid period of change and many people wanted to have a trusted adviser to help with their renewals.