It is not good enough just to have IP claims stats, the figures also need to be in a useable format. That, at least, is the opinion of many leading advisers on the issue of disclosure of income protection statistics.
The issue of IP claims stats has been catapulted back on to the protection news agenda in recent weeks as several providers have disclosed their claims stats for the first time amid signs that the regulator may decide to force protection providers to publish their claims figures.
In a discussion paper issued at the start of this month, the FSA said it is looking at requiring insurers to publish data on the percentage of successful claims, premiums versus payout ratios and the number of claims refused or reduced due to non-disclosure.
The regulator is looking at this initially for “add-on” products such as identity theft insurance but this could be easily expanded to cover IP.
Only two days after the FSA’s discussion paper was released, Zurich published its IP claims figures for the first time, revealing a 90 per cent payment rate for 121 new claims in 2012 and £14m paid out.
Zurich head of retail propositions Peter Hamilton says: “The publication of IP data has been an industry issue for some time with trade bodies and insurers both keen to disclose the information in a consistent and coherent way. While there is no formally agreed framework, which makes meaningful comparisons between insurers harder, we believe transparency is a good thing.”
This was followed by Aegon and finally, last week it was the turn of L&G to add some transparency to the IP market.
Aegon’s figures revealed a rate for successful claims of 83 per cent but this is on the back of low levels of claims as there were only 30 in 2012.
L&G has disclosed IP claims statistics before but did not disclose its 2011 figures due to its concerns over the difficulty in comparing claims figures between providers. This year the insurer has resumed publishing IP stats and revealed that 91 per cent of claims are paid out.
This just leaves three major providers that have not disclosed their data; Bright Grey, Scottish Provident and Friends Life.
All the businesses remain of the opinion that without having a common standard of disclosure, releasing IP claims data is slightly meaningless.
Friends Life head of operations for individual protection Chris Pollard says: “It is difficult to draw clear conclusions unless the comparison is between two books of similar business. We will continue to review our position in light of the ABI’s progress.”
Bright Grey and Scottish Provident say that, in addition to there being no useful comparison between providers, their IP data covers such a small amount of claims that it is not meaningful enough to publish the information.
Highclere Financial Services partner Alan Lakey says: “I do have a degree of sympathy for these companies as there is no agreement of what a claim is. For example, for someone with a thirteen week deferment puts in a claim in week four but goes back to work in week eleven. Was that a claim? It wasn’t paid does that mean it was turned down?”
But Master Adviser senior partner and Income Protection Task Force executive committee member Roy McLoughlin says not disclosing the data gives off the wrong signs to consumers.
He says: “The opinion of the IPTF is that every company should provide claims stats. Otherwise the public are naturally going to wonder what is being held back and why. If we look at the lessons that CIC claim stats taught us it is undoubtedly the case that the transparency resulted in total confidence in this product from both the public but also crucially the advisory community.”
If the threat of regulatory intervention is not going to result in universal disclosure of the claims figures then should the ABI be doing more to get its members to publish the information?
Last December it published, for the first time, collected claims data for all IP claims paid by its members but only in aggregate.
Its figures show that although IP lags life and CI in the percentage of claims upheld, across the industry, the figures are not too far away. In 2011, term life & CI paid out 94.7 per cent of the time, term life paid out 97.1 per cent while the figure for CI was 89 per cent. In comparison, IP policies paid out for 85.6 per of claims.
Mcloughlin says the pressure is on the ABI to do something about IP claims data.
He says: “The ABI should call on all its member to release stats and offer to help out those who feel it is difficult with the apparent inconsistencies.”
Plan Money managing partner Peter Chadborn says the issue of consistency is essential for the information to be useful.
He says: “Releasing IP claims data is a good thing, a healthy thing and it improves transparency and makes the industry raise its game. However, the are two caveats which are, there has to be a comparable way of measuring it, that is equally applicably to everyone, and the figures have to be used responsibly – in other words not put into a league table.”
Lakey says he would like to see companies publish additional information to help advisers put the blunt rate of claims upheld into some context.
Lakey says: “Companies need to come out with certain bits of information to give it some kind of positioning. If you take someone like the Cirencester Friendly Society, it said last year it paid out 94 per cent, 860 out of 917 clams. This useful information and has placed it very nicely, they also tell us the reasons for the declined claims.”
He also says standardisation is essential and says the long-term future of IP would be boosted by clear and understandable data.
He says: “This is where the ABI should come in. It did something similar for critical illness but it seems to have no appetite for it. Until such a time that there is confidence in the market, advisers will not go into it.”
But Mcloughlin says while standardising the data would be the most effective way of publishing the IP claims stats, the small number of providers who are yet to publish should stop dragging their heels and should trust the industry to properly interpret the data and inform consumers.
Mcloughlin says: “Ideally the format needs to be consistent but if it cannot let’s still tell our stories and as long as the caveat is easy to understand then this need not be a problem. The IPTF firmly believes that hiding behind this is not an acceptable reason for not releasing stats.”