Industry needs new ways of increasing confidence, with high payout rates falling on deaf ears
Paying claims is at the heart of the protection industry but the positive picture painted by high payout rates doesn’t appear to be getting through to consumers. Most providers publish their claims data each year, highlighting the fact the number they pay is well above 90 per cent, yet many consumers still believe it is lower. Research from Aegon last year found that 92 per cent of people it surveyed thought less than 90 per cent of critical illness claims were paid, while 58 per cent of respondents thought it was closer to 70 per cent.
If focusing on the majority of paid claims does not convince people that protection policies are more likely to pay out than not, maybe it is time for a different approach? Putting the spotlight on the reasons for declined claims could perhaps demystify the claims process, give people the facts they are missing and provide a fuller picture to ultimately encourage more people to buy the protection they need. But does the industry agree?
Dispelling the myths
Gale & Phillipson mortgage manager Richard Rutherford points out that, although the insurers who publicise the percentage of claims paid provide a positive message, the consumer press still tends to focus on the percentage of claims not paid – even though this could be as little as 5 per cent. Consequently, he believes that more information around rejected claims would increase consumer confidence, leaving
them in no doubt as to why some aren’t paid.
“The data would need to detail why claims were rejected. If clients weren’t meeting the criteria or definition terms, they should be provided with the actual reason why it was not met, and it should be published so that consumers can gain a greater understanding. Likewise, if claims were rejected due to non-disclosure, the relevant information should be provided about the missing or incorrect information,” he says.
However, Zurich head of market management Peter Hamilton believes the figures are only one part of the picture. “The emotional stories that lie behind the claims are much more important and we always look to share positive claim stories with the press. We have long published claim statistics, and believe there is value in doing so, but we also need to help customers understand why claims may not be paid. Sometimes we include case studies, appropriately anonymised, as well as indications as to why some claims cannot be paid,” he says.
Aegon head of underwriting and claims Simon Jacobs explains that insurers are limited with how much detail they can share with regards to declined claims, as each one involves sensitive personal and medical information. He says there are two broad reasons why a claim may be declined – misrepresentation or the definition not being met. “Misrepresentation means the application form being completed inaccurately to such an extent that, with full and correct information, our underwriting decision would have been significantly different – we may not have offered any cover.
“I’d encourage advisers to keep talking with their clients about the importance of accurate disclosure – a client who has confidence in, and understands, the product they have purchased is surely more likely to retain it and feel confident of the outcome if they ever need to make a claim,” he says.
Helping advisers to help clients
Jacobs adds that not meeting the definition can sometimes occur where the customer doesn’t entirely understand the cover they have, or the messages they’ve received from medical professionals around their condition or treatment. “Where we suspect a definition may not be met, we work hard to manage the claimant’s expectations in our initial conversations with them,” he says.
Protection advisers support the idea of more data on declined claims because it helps them understand the value of plans from different providers and helps them inform their client. CIExpert director Alan Lakey says: “If we could get this type of information in the public domain it would be very helpful on a personal level and it would help the industry. Not just to build confidence in the industry but to change attitudes.”
Lakey says that many insurers are open about their declined claims and always look to pay claims if they can – sometimes paying out even where they are not contractually obliged to do so, such as when they do not cover a condition on a critical-illness plan but they do cover something very similar. However, not all firms take this approach and Lakey feels if the majority do, the pressure would be on those who do not to follow or risk consumers voting with their feet.
“Insurers can help advisers by being transparent because a well-informed client is less likely to claim for something that’s not on the ‘menu’, which in turn will help reduce things like declines for ‘not meeting the definition’ on critical-illness claims,” says Roxburgh Financial Management managing director Damian O’Connor.
However, Drewberry director Tom Conner says making clients aware that the statistics exist in the first place is the real issue. “Overall, there’s a massive education piece needed to alert clients of payout rates to give them the confidence they need to invest in protection,” he says.