Non-paid claims of critical illness polices have kicked off another debate in recent weeks. It started with a worrying piece in the Mail on Sunday, with the headline: Thousands for a broken elbow, nothing for a lethal tumour. Is the system fair?
Headlines like this should make anyone working in the protection industry wince. We can criticise consumer press articles but to do so misses the point.
It is also worth remembering the paper in question runs many positive protection stories but, of course, it is the negative ones people remember.
Indeed, the public’s perception of the industry beats reality. Surveys show people believe successful claims are at around 50 per cent at best. This is why producing claims statistics for all types of protection insurance is so important.
Of course we cannot just pay all claims, but being seen to win an argument on a technicality is part of the problem. Those of us who advise, manufacture, underwrite and pay claims are expected to know the detail.
Our clients are laypeople that are never going to read the voluminous guide of CI definitions.
They enter into a contract with the motivation generally along the lines of: “If I get really ill – you know, cancer and all that – then I’ve got a financial cushion to help me out, so I guess that’s worth paying for.” The policy is acquired, often reluctantly, and will be buried in a filing cabinet hoping it is never needed.
Several years later and there is bad news from the doctor. The C-word. Scared, they try and rationalise. “Will I be ok? Wait, there is a silver lining of sorts. At least I had the foresight to buy that critical illness insurance policy thanks to that adviser that convinced me it was important. What a relief!”
But the claim goes in only to be told that, technically, while they do have cancer, it does not quite meet the definitions of the contract.
You can argue the cover was not positioned properly by the adviser but I am generalising to make a point.
The level of technical knowledge required to understand what does and does not constitute a valid claim for every definition on every different insurer’s CI policy is beyond the ability of most advisers, let alone consumers.
We know non-paid claims are in the minority. We know insurance policies cannot cover everything or they would be unaffordable. But we also know negative stories make for scary headlines and so the importance of claims statistics and the imperative message of the continued decline of non-paid CI claims is a powerful counter to negative consumer perceptions.
I understand the percentage of CI claims being paid continues to rise, with 93.1 per cent paid last year (up from 80 per cent in 2005). As an adviser at the front line, I can tell you trying to defend the story of a declined claim on a technicality is impossible.
However, there is a fighting chance of convincing a skeptical client the protection industry is onethat does try to do the right thing when we are armed with statistics such as this.
Peter Chadborn is director and adviser at Plan Money