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As advisers, we keep our ears to the ground. That’s how we’ve heard some worrying statements from representatives of a few insurers and reinsurers indicating they’d like to return to the days where providers didn’t routinely publish their claims data.
These providers seem to want to follow in the footsteps of the group protection market and just publish blanket data for the sector as a whole rather than drilling down deeper to the level of individual providers.
That would be a huge step backwards and deal a considerable blow to already-shaky consumer confidence in the industry. Here’s why we need to make sure insurers don’t back out of their publication pledges.
Publish, but why be damned?
Claims data is an important weapon in our arsenal when it comes to reassuring clients that they’re actually going to get the protection they’re paying for. Drewberry recently published data revealing that consumers believed insurers paid out on protection policies just 72% of the time, while 87% of the people who tried to guess the true figure fell short of the actual industry average, which the ABI published at 97%.
72% might sound low compared to actual payout rates but as far as consumer expectations go this is actually very high compared to earlier studies, including our own research in 2015, which suggested that consumers believe only 50% of claims are paid.
Whether it’s 72% or 50%, the upshot of this is that consumers are concerned insurers won’t pay up when they need them the most, which is the reason 22% of people gave for not buying cover in the first place in 2015 study. Understandably, no customer wants to buy a policy while under the misconception that the promises contained within it aren’t worth the paper they’re written on.
The availability of claims data means advisers can show customers that the vast majority of protection claims are actually met for the insurers they are recommending. This is an important message, one that we as advisers need to continually work on conveying to our clients.
If insurers do a sudden volte-face now, it would derail any progress we’ve made so far.
While insurers and reinsurers would doubtless argue that sector-wide statistics are just as reassuring to customers as those offered by individual insurers, it’s doubtful that this is the case. Data from a faceless collective would resonate far less with the public than data published by recognisable brands they can identify with and imagine buying insurance from.
Competitive advantage
Insurers have certainly got better at paying protection claims; there’s been a notable upward trend in the proportion of successful claims over the past decade. It’s no coincidence that this has come hand in glove with an increasing number of insurers publishing claims data.
In a free market, companies compete on price, quality of service and all manner of other metrics to encourage new customers through the door and retain existing ones. A similar effect has played out since insurers became more transparent about publishing their claims.
Putting the statistics out in the open for the world to see means everyone is better informed. It puts insurers in direct competition when it comes to payout rates, which has raised standards across the industry.
Returning to the days when payout rates were shrouded in secrecy would mean a massive easing off of the competitive pressure on insurers. If claims then start to slide as a result, any consumer trust we’ve managed to build will also quickly ebb away.
Good press, bad press
One of the arguments put forward for not publishing claims data is that because insurers are never going to be able to pay 100% of claims, the media will always zone in on the claims that get turned down.
It doesn’t matter how small a percentage of the total that may be – any claims that get turned down in the protection sector are an emotive topic because there’s (often) an ill or injured policyholder on the other end of the insurer’s decision.
These denials are excellent fodder for lurid headlines and form part of the reason consumers’ expectations of the industry are so low, even though declined claims only make up the smallest proportion of the total. The theory goes that putting statistics out there that inevitably show less than 100% of claims are paid makes it all the easier for the tabloids to dine out.
However, it’s naive to think that not publishing individualised data would solve the problem. The appetite for this type of story won’t vanish the second insurers stop publishing these statistics. If anything, insurers backing away from their commitment to publish data will only add further fuel to the fire. The newfound opacity will especially rankle if the number of successful claims begins to slide without the competitive pressure publishing the data provided.
Insurers could instead use the press to their favour by publishing the high rate of successful claims more widely, along with some of the reasons claims are denied. If a customer has failed to disclose they have an illness when they took out the insurance and subsequently tries to claim for that illness, they naturally won’t be covered.
A comparison with other types of insurance where denied claims come with less emotion attached may be helpful. A motorist who fails to disclose numerous speeding convictions or drives without a valid licence cannot expect to be covered by their car insurance, for instance.
As advisers, we should also work as hard as we can to ensure the client has disclosed every detail that may matter should they later come to claim. This will stop claims being turned down in the first place.
Transparency is the best policy
A return to the murky old days is not good enough. It will be bad for insurers, who’ll be accused of sweeping bad news under the carpet. It will also be bad for advisers, scuppering any progress we’ve made towards getting consumers to trust in the industry and buy the policies on offer.
Insurers must continue publishing claims data at an individual level. Not just for the sake of intermediaries and customers, but also because a lack of transparency will actively harm prospects for insurers themselves.
If you agree that insurers should continue to publish claims data individually then the more feedback we can provide to our insurer account managers the better.
Tom Conner is a director at financial advisers, Drewberry, and a member of the Protection Distributors Group (PDG).