It is time for the insurance industry to be far more transparent about the claims it pays.
There have been moves to encourage health insurers to publish the proportion of claims declined on critical-illness and income protection policies. Many now do so. Meanwhile, legal changes have put the onus on the insurer to ask relevant questions, rather than on policyholders to recall every trip to the doctor.
At the time there was a lot of whingeing from the insurance industry but guess what? This transparency and clearer legal guidance have led to far more claims being paid.
Surprisingly, not all insurers publish these CI statistics. Some use the excuse that this is not
a major part of their business.
Can you see an investment company refusing to publish performance figures if only
a small portion of its business is in, say, US funds? Who would buy an investment fund if you could not see the manager’s track record? Surely the same principle should apply across the insurance industry.
The main yardstick for customers when choosing a policy is cost. Policy documents outline the extent of cover, any exclusions, maximum payouts and so on. But how many consumers wade through them?
When buying insurance, consumers are buying a promise. It would be useful to know how good a company is
at honouring it.
This is not to say that insurers should pay every claim. Some policyholders will have misunderstood what is covered or will deliberately exaggerate or falsify a claim. But the ratio of claims paid – as a percentage of premiums collected – should still be a useful guide. Not only would it help consumers to compare firms; it should give them an idea of which policy offers the best value for money.
Simply publishing these figures could lead to a better claims experience while giving insurers something else to focus on rather than slashing cover in order to compete on cost.
This course of action could be forced upon insurers sooner than they think. Recently the FCA said it was clamping down on add-on policies that often offer poor value. These include mobile phone insurance and GAP policies sold with cars. Companies selling these will now have to publish claims ratios, which show that just 10 per cent of premiums collected on GAP policies are paid out in claims, versus 64 per cent for car and home insurance.
The FCA should go further and force insurers to publish these for all products, as well as statistics on what proportion of claims they decline. Only then will consumers see whether the policies they are buying represent real value for money.
Emma Simon is a freelance journalist