“We're going to do a thorough review of our communications processes and make sure we do as good a job as we possibly can,” Kerry Boielle, chief sales and marketing officer, told GoodReturns.

Adviser Jon-Paul Hale of Willowgrove Consulting, Graeme Lindsay, who provides analysis to life and health insurance agents through his firm Strategy Financial Services and Russell Hutchinson of industry consulting firm Chatswood Consulting have all told GoodReturns they've only just become aware that the benefit, which previously covered non-surgical hospitalisations, had been dropped.

The wording of Southern Cross' policies does allow it to change the benefits its policies cover, so the issue was whether it communicated the changes it made in 2020 adequately – the removal of the benefit was one of many changes made at the same time.

Boielle reiterated Southern Cross' previous arguments that everything previously covered by the non-surgical hospitalisation benefit remained covered by various other categories of benefits and that it had been a rarely used benefit by Southern Cross policyholders.

The company still continues to insist that it did adequately inform policyholders and advisers at the time.

Advisers had already provided GoodReturns with a number of brochures sent policyholders at the time which enumerated many changes to policies but which did not mention the withdrawal of the non-surgical hospitalisation benefit.

More evidence

Southern Cross has now given GoodReturns a copy of a densely printed two-page brochure sent to Wellbeing policyholders at the time which does explicitly say at the top of the second page: “The non-surgical hospitalisation benefit has been replaced with the IV infusions (non-cancer) benefit.”

It did not say that the withdrawn benefit had offered cover up to $60,000 a year or that its replacement IV benefit provides cover of $600 to $1,000 a year, depending on the type of policy.

As previously mentioned, Southern Cross provided GoodReturns access to a presentation to analysts given in October 2020 which did explicity say at just over an hour in that the non-surgical hospitalisation benefit was being withdrawn.

Southern Cross argues that the new IV replacement benefit still covers what most people claiming the withdrawn benefit had used it for.

Boielle says the average claim against it by 801 people averaged $414 each in 2019.

In the three years before the change, only one member had claimed more than $10,000.

The withdrawn benefit was poorly designed and “poorly utilised. It created a lot of confusion for our members,” she says.

“The main things claimed were overnight situations for sleep studies, IV infusions and rats and mice often associated with surgury” and other treatments.

Low utilisation

“Claiming behaviour and utilisation was really, really low and it wasn't well-understood by members. That's the main reason for changing the benefit. Every single item that was previously paid is covered elsewhere,” Boielle says.

The analysts presentation had referred to 25 policyholders being affected by the withdrawal.

Boielle says Southern Cross identified seven policyholders who had been claiming an average of $6,000 against it who would no longer be covered and had contacted them directly.

They had been receiving treatment from one of only about four private providers and the treatment  was much more widely available by the public sector. Southern Cross had given them 12 months notice to transition to a provider in the public sector, she says.

While some other providers still provide apparently greater non-surgical hospital benefits – Partners Life, for example, offers up to $500,000 a year – Boielle says that it isn't possible to directly compare them because, for example, the other companies include cancer treatment but the Southern Cross withdrawn benefit had never included cancer treatment, which is covered by other benefits.

For example, Boielle says in the 12 months ended August, Southern Cross has paid out $37.5 million in chemotherapy claims.      

For some reason, Theresa Gattung's famous quote about telcos using confusion as a marketing tool comes to mind.