Transparency about claims statistics is crucial
In a way it depresses me that there is still an ongoing debate about claims disclosure. The debate has been raging for some years and was started because advisers felt that the publication of claims paid percentages would give them, and much more importantly their customers, faith in critical illness (CI) products which were starting to be criticised for not paying out (particularly where total permanent disability was concerned).
I remember debating against the Association of British Insurers (ABI) at an industry conference several years ago in favour of disclosure although the ABI took a benign and very constructive position in the debate. I think claims disclosure is one of the biggest “no-brainers” on the planet. Most companies have very good claims paid statistics for CI and have no reason to fear disclosure and if you have then I think advisers and potential buyers of the product have every right to wonder why claims percentages are lower than might be expected. That is not to say that I think league tables tell the absolute truth (certainly the Premiership table has been lying these last few years!).
We can get obsessed with league tables. I blame the previous government who put almost everything into tables and tried to inculcate the idea in peoples’ minds that these sort of rankings are a completely reliable guide to who to buy a product from.
If a company is languishing at the bottom with a claims paid percentage many points below the rest of the market I can fully understand why advisers might fight shy of recommending them. But it is illusory to assume that a company is a better bet because it pays 96% of its claims to one that pays 95%. Anyway the good news is that at least in the CI market disclosure is the norm.
It’s a slower process in the income protection (IP) market. A lot of companies are happily revealing their claims paid percentages but this is by no means universal. The early meetings of the Income Protection Task Force – of which I am co-chairman – were marked by interminable discussions about what exactly constituted a claim as some providers felt they might be disadvantaged if their figures came under public scrutiny. I realise that some companies operate in different markets and a bancassurer for example may have a lower claims paid figure than a company selling IP solely among the professional classes. But surely the point is that the public deserve to know these figures. Would you buy a car if you didn’t know how fast it could go or what its fuel consumption was? Neither should anybody be expected to buy an IP policy from a company that won’t reveal their claims paid percentage.
We have made it clear at the IP Task Force that membership will be conditional from next year on revealing this figure on a basis to be agreed that is accepted as fair and realistic.