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Letting the stats out of the bag

Critical-illness insurance providers are coming under increasing pressure to release claim data, says Nicola York

The public’s lack of faith in critical-illness insurance is being reinforced by some providers’ reluctance to publish CI claim statistics.

Capital Asset Management director Alan Smith says: “By not publishing this data, it makes it difficult for Legal & General and other providers to sell these products in the volumes they should be selling them in because, frankly, the buying public do not trust these policies.”

Smith says although he would not exclude a provider which had not published this data, he would have second thoughts about recommending them to a client. He says it would make him look very closely at the policy schedule and the circumstances in which it would not pay out.

Chadborn Baker & Kearle principal Peter Chadborn says it does not make sense that some companies disclose their statistics and others do not. He believes a lot of useful information comes out of this data and it can be a good talking point with clients as it makes it “more real” for them.

He accuses providers that refuse to reveal claims statistics of having “a sense of arrogance”. He says: “Certain providers have the attitude that they do not need to do this because they are who they are. If you are a major player, your statistics should be in the public domain.”

Cambourne Financial Planning director Mark Loydall says: “We should know what they are turning down and why they are turning it down. Have they got something to hide?”

Publishing claim statistics is a powerful tool for providers, says Loydall, who thinks it can be a good sales angle for providers and advisers. “It helps us as advisers to know what we should be looking for in applications and why claims are rejected. Openness and honesty are the best way all round,” he says.

Skandia protection marketing manager Alison Turner-Holmes, who instig- ated the insurer’s policy to release claim data, says: “When an adviser sells a critical-illness policy or life insurance policy, it is not a tangible product. Now, the great news is that everybody releasing claims-paid information makes it more tangible and gives the broker something to sell and proves that it works. The proof is in the pudding.”

Turner-Holmes thinks this level of transparency will show up any flaws in the product and, therefore, these statistics are important as a mark of quality. The latest figures from Skandia show that 2 per cent of applications are turned down due to non-disclosure.

Turner-Holmes says: “I think that any major provider should have systems available to release that data. I would say to those two very big pile it high and bring it in cheap providers – show us what you are made of.”

The ABI has made its position clear on releasing claim data. It is “perfectly happy” for individual companies to release their own data but it does not intend to collate this data across the whole industry.

Spokesman Jonathan French says: “We do not feel that, at present, it is in the interest of consumers to have industrywide data in the form of what might be a league table because you cannot meaningfully compare one company’s data with another in the sense of being able to make a rational judgement as to what policy one can purchase.

“There are so many other factors that consumers need to take into account when they are deciding what type of protection insurance to buy and from whom.”

But Smith thinks the ABI needs to modernise its approach. He says: “The ABI and FSA need to look more closely at non-advised critical-illness cover sales because they are potentially building up a huge amount of problems down the line for everyone concerned, including the FSA and Financial Ombudsman Service. There is an argument for saying that non-advised critical-illness policies should not be allowed to be sold.”

Chadborn says advisers would be irresponsible to concentrate solely on the number of claims paid out but using them as part of the bigger picture can only be positive. He says the more information the adviser has, the better they will be able to advise their clients.

Some advisers find it hard to understand why providers would not want to publish these statistics but Lifesearch senior technical adviser Kevin Carr says one concern of providers have is that advisers will recommend those providers that pay out more often than others. Providers with higher declination figures are worried they would lose business as a result.

But Standard Life protection marketing manager Mick James says these providers are treating advisers and customers as if they are naive. He says: “They should be allowed to make up their own minds. It does not do justice to the intelligence of intermediaries. These statistics are another facet that will add to the intermediaries’ armoury.”

The ABI says the statistics could mislead consumers and advisers because overall declination figures are not an indication of whether an individual claim will be declined. French says: “The important thing for advisers is that they make sure they are giving proper advice to consumers on the terms and conditions of any given policy and that they are explaining very clearly to the customer exactly what the customer’s obligations are when applying for the policies in terms of disclosing pre-existing medical conditions.”

Not everyone thinks it is the ABI or FSA’s responsibility to intervene. Smith and Turner-Holmes believe it should not be a regulatory issue. Smith believes that market pressures will ultimately force providers to release their data and so he does not see legislation as being necessary.

Norwich Union and L&G have been named as two of the major providers which are not publishing this data. However, NU media relations executive Rob Pell says it will publish critical-illness claims statistics within the next few weeks, including how many claims were declined as well as the reason for declination.

In an email statement, L&G protection director Bernie Hickman says: “There are many factors that will influence the number of claims turned down. It is not possible, therefore, to provide figures which give a fair and meaningful comparison between different providers. If it were possible to ensure a consistent comparison of declined claim figures, we would disclose our figures.”

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