Claims to fame
Claims statistics remain integral to building confidence in protection insurance, says Kevin Carr, chief executive of Protection Review, who reckons he can still tick off 10 things most financial advisers do not know about them
Springtime is here, which in the protection calendar means insurers are busy publishing their ‘claims paid’ stats – something many have done annually for more than a decade. During that time, the level of insurer transparency given to advisers and consumers has increased immensely, which has typically been warmly welcomed by consumers groups and the media.
Nevertheless, within the industry, there remains a lot of debate as to whether we use claims statistics in the most effective way – and whether or not they should be published at all. So here we are going to take an in-depth look at claims statistics, how to use them and why they are still integral to building confidence in protection insurance both for consumers and advisers.
"We are not in the market of selling insurance but of selling a promise to customers – a promise that, if a certain event happens, we will look after them financially."
* Claims being paid continue to rise
On average the number of protection claims paid has increased by approximately 15% since 2005. Back then, when issuing claims statistics was relatively new for most providers, some fourth fifths of critical illness claims were paid. Today the latest collective ABI data shows this figure now stands at 91.8%.
Industry developments to prevent innocent and fraudulent non-disclosure have played a huge part in ensuring more claims are paid each year. The transparency involved in issuing claims stats will also have brought greater scrutiny as to why claims were being declined.
The protection sector pays £8.1m in claims benefit every day, through life, income protection and critical illness policies, totalling £3.1bn annually. I have heard people in the industry say we are not in the market of selling insurance but of selling a promise to customers – a promise that, if a certain event happens, we will look after them financially. As an industry we are very good at keeping those promises, but unfortunately this is often contrary to popular belief.
“The publication of claims statistics is an important part of proving that each firm – and protection as a whole – is open and transparent,” says Andrew Jenkinson, a director at Drewberry Insurance. “In our 2015 consumer survey, the average response when asked how often insurers pay life claims was 50%, when the actual figure is over 90%. People are still underestimating the effectiveness of insurance.”
* It is about more than critical illness cover
When claims statistics were first published it was usually all about critical illness policies – hence the solo comparison above. Back then, there were stories on the TV and in the consumer press every month, if not every week, about a declined critical illness claim – and the industry’s reputation took one heck of a beating. It is easy to remember the bad stories of course but, in truth, most media coverage of protection insurance is very balanced and generally positive.
Today, figures for life cover and income protection products are also regularly published. Alongside the 91.8% in critical illness claims, 91.1% of income protection and 98.4% of life claims are paid on average. And those declined claim stories? Well, they have not quite disappeared, but there are a lot fewer of them.
* It is not about more than money too
When someone claims on a protection policy, some of the most valuable – yet at the same time undervalued – services are the ancillary benefits providers offer. Whether a family member needs bereavement counselling, or someone has had an accident and needs rehabilitation support, these services can be provided by the insurer or partners working alongside them. It also often means people can access vital support services much faster than they may otherwise.
“What is important about rehabilitation in the insurance context is that it can encompass anything that helps to move people towards getting them back to a productive life, which is what most people want to do,” says independent consultant Karin Lloyd. “It gives them dignity and purpose.”
Examples of such initiatives include Friends Life recently becoming the latest provider to partner with Best Doctors to provide global medical treatment to its policyholders. This will give customers access to the leading medical experts and treatments around the world for themselves and their children, covering a range of serious illnesses including all cancers.
On a different note, Vitality Life recently announced it paid a record amount in claims during 2014 with an increase of 66%, compared with 2013, on the amount paid out. But the firm also encourages healthier behaviours through reduced rates and its members had 21,000 health checks carried out in 2014.
* Keeping track of claims stats
Most insurers publish their stats on a yearly basis – usually via a press release to the trade publications – but companies do publish their numbers in different ways and at different times, so it can be hard to keep track. As each insurer issues its claims statistics for numerous products independently, it can be time-consuming for advisers to look at the data collectively for use with clients, therefore, many simply will not include it in their conversations.
However, specialist firms such as F&TRC and CI Expert allow advisers to see all the data and compare the latest numbers across the industry. “The protection industry is very transparent when it comes to claims statistics,” says F&TRC managing director Ian McKenna. “But that is only useful if people can use the information simply and efficiently.
“To help advisers get the most out of valuable protection claims data we provide a regularly updated one-stop-shop of information in a simple and consistent format, that will help clients understand the need for protection.” The F&TRC tool has recently been updated with new insurer claims figures, and is free for advisers to access here.
* Bringing examples of claims to life
Using real life case studies is a useful way of helping clients to see the real benefit of protection policies. The recently launched Seven Families campaign shows the difference protection policies can make to people’s lives, through both financial support and rehabilitation services. The campaign, funded by major UK insurance companies and led by charity Disability Rights UK, is supporting seven families across the UK who have lost an income due to a sudden illness or disability, with no financial support in place.
It includes a brain stem stroke sufferer who has been left paralysed, a policewoman left disabled after a motorcycle accident and someone losing their sight. It uses films to tell each family’s story, highlighting the difference the support of the campaign has made to their situation and recovery, and helps raise awareness of the importance of protection. It is an emotive and simple way to help get the message across to clients. You can follow the stories of the families here.
* Why do people claim?
One of the most useful elements of the protection claims statistics issued by insurers is the list of most common reasons people make claims, which enables advisers to help clients understand what can be claimed for. While this differs slightly between providers, traditionally, cancer makes up the highest percentage of critical illness claims, followed by heart attacks and strokes. For income protection, back-related conditions and mental health claims are most prominent, which highlights the point that critical illness and income protection are often complementary products.
* Long-term claims statistics
This year, British Friendly became the first protection insurer to release long-term claims statistics. The income protection specialist paid a total of 96% of claims over the last five years and challenged other insurers to publish their claims stats in a more timely fashion.
“We were the very first insurer to publish claims statistics for the whole of 2014 and we are also able to share the number of paid claims for the last five years to prove that we deliver on our promises - to pay all genuine claims consistently,” says Mark Myers, the chief executive of British Friendly.
“I believe all insurers should publish their statistics by the end of January. The information is available to all insurers almost immediately so there is no reason why they should not all be published in the first 30 days of each year. It is imperative that, as an industry, we demonstrate an absolute commitment to delivering excellent outcomes for our customers.”
* How to use the statistics
There are few better ways to answer the ‘Does it pay out?’ question than by providing independent verification that more than 90% all claims are paid. This can then be followed up with a brief explanation of the other 10% and why some claims are declined for valid reasons, which itself is a good practice to ensure any future claims are paid.
There are two reasons why claims are declined – not meeting the definition, which means the cause is not covered, such as claiming for stress on a critical illness policy; or non-disclosure of a material fact, such as not telling the insurer something that would have changed the terms of the policy.
* Financial advisers buy cover too
One of the best stats I ever remember seeing on an insurer’s paid claims press release was that four in five financial advisers had their own income protection policy. Alas I am unable to quote the source of the research nor the sample size as it was a long time ago. Still, I always thought that if an adviser sold something to themselves it must be worth having.
* Some insurers do not want to tell
It may or may not surprise you to learn that some insurers still do not want to publish their statistics. Despite the many positive reactions from advisers and the media, some insurers just do not see the benefit while some others think the job is done – and that trust has been rebuilt.
I beg to differ and would strongly suggest that, as an industry, we not only continue to publish claim statistics, but move forward to make much more information available and promote it so that advisers and consumers really get to know about it.
We are currently running a poll on the Protection Review website asking: “What should the protection insurance industry do about claim statistics?” You can cast your vote here.
Kevin Carr is managing director of Carr Consulting and Communications and chief executive of Protection Review