Hayden Jonas addressed the Institute of Financial Advisers conference in Auckland yesterday.

He stepped in at the last minute for Naomi Ballantyne, who was called off to an urgent meeting.

Jonas said there was a perception that medical insurance was not sustainable because up to 90% of premium income was paid out in claims.

But he said the statistics were skewed by the inclusion of captive insurers who were no longer taking new clients. “They have an ageing client base, with an increasing claims ratio because they are unable to offset that with new business.”

Jonas said other companies tried to undercut the market from time to time and it could take a while for those blocks of business to become profitable.

“It also includes companies whose policy wordings, underwriting quality and/or claims management processes did not, or do not allow them to manage claim ratios effectively.”

He said medical inflation that outpaced general inflation had also been identified as a problem but many treatments were also becoming more effective.

Jonas acknowledged that affordability tended to drop for older age groups, who were more likely to claim.

He said advisers dealing with clients in that position could encourage them to save in their 40s and 50s to cover medical insurance premiums once they retired. Or he said advisers could consider whether a trauma product would offer a better outcome.

Jonas said health insurance might need to change in future so that it targeted only the areas where the public health system did not apply.

He said the New Zealand medical insurance industry was too disjointed to have yet campaigned effectively for measures such as tax breaks for medical insurance policies.