New Zealand: FSC busts top 10 myths about health insurance

| 24 May 2022

In its recent "Money and You" blog, the Financial Services Council (FSC) made a list of 10 myths about health insurance among customers which were debunked by several industry leaders.

Myth #1: I’m young and healthy so I don’t need health insurance

A spokesperson for Southern Cross Health Society said young singles and couples are the company’s fastest-growing segment, and these members are relatively active claimants. Nearly half (46%) have made a claim in the last 12 months, proving that health insurance is valuable to this age group. Also, all things being equal, young people typically pay cheaper premiums.


Myth #2: Health Insurance is too expensive for most people

Health insurance plans are available for most budgets, said Southern Cross’ spokesperson. The more comprehensive policies provide cover for major medical expenses and specialist consultations. But there are several more affordable options that offer "cover for day-to-day healthcare services (such as optometrist, dentist, nutritionist) and cost from $1 a day for under 35-year-olds.


Myth #3: I don’t need health insurance. I can always get the health care I need through the public system or ACC

The public health system and ACC offer excellent care for serious health conditions. However, if you have a non-urgent condition you may end up on a long wait list and spending significant time on public health system wait lists can impact both your health and quality of life. As such, having private health insurance can help with the cost of these types of non-urgent procedures and provide faster access to private hospitals for treatment.


Myth #4: If I have an existing health condition, I can’t get cover

If you have a health condition before you take out a policy, otherwise known as a pre-existing condition, you can still get health insurance. Normally pre-existing conditions are not covered unless a health insurer agrees in writing. But the insurance will still cover other conditions not related to the pre-existing conditions.


Myth #5: If I cancel my policy today, I can always just pick it up later

Partner’s Life head of industry engagement Mark Banicevich said, “If you cancel your policy, or if you change to a different insurer, you let your existing insurer off the hook. When you apply for a new policy it may load or exclude conditions that were covered under your original policy.”  Your premiums may also be higher if your health or the insurance market has changed since you cancelled your original policy.


Myth #6: The chance of something happening to me is low, so I can self-insure/self-pay

Though this do-it-yourself attitude is common amongst Kiwis, it can be misguided, said Mr Banicevich. “Insurance exists precisely because the cost of certain events is much more than most people can afford to pay. The life and health insurance industry paid almost $700 million in claims in the three months to December 2021 alone – that’s over $200 million per month.”


Myth #7: If I claim, my premium will go up

Once you’ve signed a contract with your insurer, your premiums may increase with age, but they won’t necessarily go up if you make claims, said Mr Banicevich. In some cases, your premium may go up by a certain percentage if you make a claim, however, you may also be rewarded if you don't claim. Some insurers have a reward for low claims, meaning that if you haven't claimed, you may qualify for a reduction of your premium.


Myth #8: If I have health insurance, I’ll be forced to go to a limited list of hospitals or specialists

Ms Fiona Mackenzie, Brand and CX Manager at Accuro, said, “Not all health insurers require you to see a provider that they have partnered with, so it is worth checking the conditions of your policy before you join. Most health insurers in New Zealand also require that the medical provider you are seeing is registered with the New Zealand Medical Council or other relevant body, to ensure that they are legally allowed to practise.”


Myth #9: Private health insurance takes away resources from the public system

It is a common misconception that private health insurance puts strain on the public system by diverting resources away from it. But the truth is quite the opposite, said Ms Mackenzie. “The private healthcare sector can take pressure off the public system by treating patients significantly faster. This means that it can treat conditions before they become acute. A 2016 study estimated that this saves the public sector $100 million a year.”


Myth #10: Health insurance becomes unaffordable as I get older

Of all the myths out there, this myth has the most truth to it, said Ms Mackenzie, as premiums do tend to increase as the policyholder ages.

However, it is precisely during old age that health cover becomes most valuable. “As we get older, we are much more likely to claim on our health insurance and for more expensive treatments/procedures.”

Despite that, there are several ways to reduce your premiums, from increasing your excess to adjusting your level of cover or changing your payment frequency or method.