10 things you probably don’t know about claims statistics01/04/2015
It’s the spring, 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. But there is still a lot of debate within the industry as to whether we use claims statistics in the most effective way – and whether or not they should be published at all.
Here, we 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.
1. Claims being paid continues to rise.
On average the number of protection claims paid has increased by approximately 15 per cent since 2005. Back then, when issuing claims statistics was relatively new for most providers, approximately 80 per cent of critical illness claims were paid. Today the latest collective ABI data shows that this figure now stands at 91.8 per cent.
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 to why claims were being declined.
As an industry we pay £8.1m in claims benefit every day, through life, income protection and critical illness policies, totalling £3.1bn annually. I’ve heard people in the industry say that we are not in the market of selling insurance, we are in the market 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.
Andrew Jenkinson, director at Drewberry Insurance, says: “The publication of claims statistics is an important part of proving that each firm, and protection as a whole, is open and transparent.
“In our 2015 consumer survey the average response when asked how often insurers pay life claims was 50 per cent, when the actual figure is over 90 per cent. People are still underestimating the effectiveness of insurance.”
2. It’s not just about 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 CI claim – and the industry’s reputation took a 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 per cent in critical illness claims, 91.1 per cent of income protection and 98.4 per cent of life claims are paid on average.
And those declined claim stories? Well, they haven’t quite disappeared, but there’s a lot less of them.
3. Claims statistics in one place.
Most insurers publish their stats on a yearly basis, usually via a press release to the trade publications. But insurers 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 won’t 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.
F&TRC managing director Ian McKenna says: “The protection industry is very transparent when it comes to claims statistics. But that’s 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 tool has recently been updated with new insurer claims figures, and is free for advisers to access at www.advisersoftware.com.
4. It’s not just about the money.
Some of the most valued services when someone claims on a protection policy, but ones that can be very much undervalued in the sales process are the ancillary benefits that 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 that people can access vital support services much faster than they may otherwise.
Independent consultant Karin Lloyd says: “What’s 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. It gives them dignity and purpose.”
Examples of these initiatives include Friends Life recently becoming the latest provider to partner with Best Doctors to provide global medical treatment to its policyholders. It 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 per cent compared to 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.
5. Bringing examples of claims to life.
Using real life case studies is a useful way of enabling clients to see the real benefit of protection policies. The recently launched Seven Families campaign shows the difference that 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 help raise awareness of the importance of protection.
It’s an emotive and simple way to help get the message across to clients. You can follow the stories of the families at www.facebook.com/7Families.
6. Why do people claim?
One of the most useful elements of the protection claims statistics issued by insurers are the most common reasons people made 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 CI and IP are often complementary products.
7. 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 per cent of claims over the last five years, and challenged other insurers to publish their claims stats in a more timely fashion.
Mark Myers, British Friendly CEO, says: “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.
“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 shouldn’t 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.”
8. How to use the statistics.
There are few better ways to answer the ‘does it pay out?’ question than by proving independent information showing that more than 90 per cent of all claims are paid. This can be followed up with a brief explanation of the other 10 per cent 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 that 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’ve changed the terms of the policy.
9. 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 can’t quote the source of the research nor the sample size as it was a long time ago, but I always thought that if an adviser sold something to themselves it must be worth having.
10. Some insurers don’t want to tell.
It may or may not be surprising to learn that some insurers still don’t want to publish their statistics. Despite the many positive reactions from advisers and the media some insurers don’t see the benefit while some others think that 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.
Right now we are currently running a poll on the Protection Review website asking: “What should the protection insurance industry do about claim statistics?” Seewww.protectionreview.co.uk to cast your vote.
Kevin Carr is managing director of Carr Consulting & Communications and chief executive of Protection Review
First appeared on FTAdviser.com