There is no rescission in NZ

Rescission, in the insurance industry, is the practice of voiding the contract between the insurer and the policyholder when the policyholder would otherwise be due some money. I’ve been watching horrible tales of this practice in the US for a while and smugly telling people that we don’t have those problems here in NZ.
Well, our health insurers have learnt some lessons from the US apparently. Terminally ill Wayne Croft has had his policy cancelled because (the insurer alleges) he didn’t declare some pre-existing health conditions (all of which are minor, none of which relate to his cancer at all). Croft says he never tried to hide anything and did his best to be upfront. The icing on this sad cake is that Croft only recently switched insurers, because he was promised a better deal at Sovereign than he had at the other place where he had initially taken out insurance as an 18-year-old.
Crucial difference between here and the US: our public health system is still intact. That doesn’t make this any less reprehensible.
It’s clear to me that the insurer bears much more responsibility than they’re prepared to admit. They have all the power in the relationship, and that should properly impose responsibilities upon them. One form with a “declarations” box is simply not sufficient to claim due diligence has been performed, not when the stakes are this high for the policyholder. Forms are distinctly user-unfriendly, and lend themselves to distortion and omission even with goodwill and diligence. Sovereign has acted appallingly, and I hope the NZ public send a clear message to Sovereign and the health insurance industry that this is not acceptable behaviour in this country.
(It was satisfying to watch John Campbell go attack-dog on the Sovereign rep on his show last night. I watch Campbell about once a year, if that, and this was a good night to pick.)

8 thoughts on “There is no rescission in NZ”

  1. There was a great Tom The Dancing Bug cartoon on this practice in the US a few years back, presenting analogies such as parachutes that work in all conditions except when falling, etc.

  4. Posted a comment on Mash’s blog and decided to follow the link.
    Some useful snippets here if you care:
    Leading cause of bankruptcy in the US – responsible for 50%?: Health bills
    Of those who go bankrupt through health bills, 50% of them actually have health insurance.
    Links:
    Baseline Scenario – very good economics bloggers: http://baselinescenario.com/2009/07/27/health-insurance-innovation/
    This American Life – excellent podcast: http://thislife.org/Radio_Episode.aspx?episode=386
    Note that the podcast generally expires on the weekend and goes behind a paywall (though I keep copies). The stories are quite affecting.
    Baseline Scenario has some more on rescission which I haven’t got around to reading yet.

  5. I was beaten to the This American Life punch!
    They asked the execs of some big insurance comapnies some pretty amazing questions, including one about different conditions that a potential insured person needed to disclose. I had never heard of them, and the execs didn’t have any idea what those conditions were!
    Check it out.

  8. Billy – yeah, that’s a great piece, filled in a few of the blanks and made very clear the scale of the problem in the U.S.

Comments are closed.