Trauma wor­ries for in­sur­ers and cus­tomers

The Dominion Post - - Business - SU­SAN ED­MUNDS

New Zealan­ders are still be­ing caught out by trauma in­sur­ance not cov­er­ing what they ex­pect it to.

Trauma in­sur­ance is a type of per­sonal cover that pays out a lump sum if you de­velop one of a range of con­di­tions that are spec­i­fied in the pol­icy.

These are usu­ally things such as can­cer, stroke or heart at­tack.

Sta­tis­tics show New Zealan­ders spend $427 mil­lion a year on trauma pol­icy pre­mi­ums. Trauma poli­cies now cover a wider range of con­di­tions than they did in the past, with more gen­er­ous cover.

In­sur­ance and Fi­nan­cial Ser­vices Om­buds­man Karen Stevens said about 5 per cent of all com­plaints to her scheme in the past five years re­lated to trauma in­sur­ance.

‘‘Trauma in­sur­ance is very spe­cific. A com­mon is­sue is that peo­ple be­lieve trauma in­sur­ance will pro­vide gen­eral cover for any trau­matic ex­pe­ri­ence, or if you can­not work be­cause of ill health. It won’t,’’ she said.

‘‘Fi­nan­cial ad­vis­ers could do more to ed­u­cate their clients about trauma in­sur­ance poli­cies.

‘‘The type of con­di­tions that will be cov­ered will be listed in the pol­icy, and the trauma ben­e­fit will only be paid out if the in­sured has suf­fered from one of those spe­cific and listed con­di­tions.’’

She said call­ing it ‘‘trauma’’ in­sur­ance was too generic and re­nam­ing it ‘‘crit­i­cal ill­ness’’ cover, as some in­sur­ers al­ready have, would help.

One cus­tomer com­plained to her office when his con­ges­tive heart fail­ure and di­lated car­diomy­opa­thy did not meet the in­surer’s cri­te­ria for a heart at­tack.

The om­buds­man sided with the in­sur­ance com­pany be­cause the client needed to be able to show that a por­tion of his heart mus­cle died be­cause of his heart at­tack, and he could not do so.

Robyn Bartlett, life prod­uct man­ager at As­teron Life, said trauma in­sur­ance was one of the most con­fus­ing per­sonal in­sur­ance prod­ucts on the mar­ket.

She said As­teron Life’s pol­icy cov­ered 44 spe­cific con­di­tions and pro­ce­dures and each one would have a med­i­cal def­i­ni­tion that had to be met to re­ceive a pay­out.

The in­sur­ance in­dus­try has strug­gled with the poli­cies too, be­cause some have al­lowed big wind­falls – some­times pay­outs of $1 mil­lion – when peo­ple suf­fered con­di­tions that put them off work for only a cou­ple of months. That put pres­sure on pre­mi­ums.

PHOTO: 123RF

A cus­tomer com­plained to the In­sur­ance and Fi­nan­cial Ser­vices Om­buds­man on dis­cov­er­ing that his heart at­tack did not meet the def­i­ni­tion in his pol­icy.

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