Income protection providers are coming under increasing pressure to publish their claims statistics. But should the industry focus on the more positive message of rehabilitation? Emily Perryman reports
The income protection (IP) industry has spent countless hours debating how to reverse dwindling sales. Suggestions put forward have included boosting awareness among consumers, educating advisers and streamlining the underwriting and administration process.
But a recent poll of IFAs by industry analyst Defaqto indicates that providers need to take a step back and ensure the product does what it says on the tin: pay claims. The research asked advisers to rank the most important service and satisfaction disciplines that providers should have. Attitude to claims – or treating claimants fairly and paying claims wherever possible – came out on top, above administration, commission, underwriting and brand.
An optimistic reading of the results suggests that advisers want what is best for their clients – and being treated fairly at what could be a very stressful and frightening time is clearly important. But Defaqto, giving a somewhat pessimistic interpretation of the research, said the results underline the lack of confidence that consumers and IFAs have in insurers to pay claims. Despite calls from many people in the industry, the majority of providers still refuse to publish their IP claims statistics – a decision, Defaqto said, which may cause people to think insurers have something to hide.
“There is a crisis of trust evident in the IFA research,” the report states. “Clients, but more importantly IFAs, do not trust insurers to pay out. The current bad press surrounding MPPI will inevitably tarnish IP too. Insurers must remove from the contracts all aspects of the underwriting and processing of claims that can appear arbitrary or unfair and must move to publish claims statistics as soon as possible. Restoring the confidence of IFAs is the first step so that they can be strong advocates of IP and its value to clients.”
At present there are just six providers that are known to publish their IP claims stats: AEGON Scottish Equitable, Cirencester friendly, Dentists & General, Holloway Friendly Society, LV= and Pioneer. The largest IP provider, Friends Provident, says it does not believe publishing stats would be beneficial for the industry as a whole.
“I don’t think publishing critical illness (CI) stats did us any good,” says Mark Jones, head of protection at Friends Provident. “It did focus us on what caused problems, but it also created the ‘20% of claims are turned down’ mantra, which people still latch onto. Another problem is that if a provider pays an IP claim it could assert to be making a decision every month, so the stats would be open to manipulation. If they said how they make a decision, people don’t want that level of detail.”
Meanwhile, the industry’s second largest provider, Norwich Union Healthcare, says it will only publish stats if every other provider does too. Senior propositions manager Nick Homer believes there needs to be an industry framework specifying how providers should publish stats so that people can “compare apples with apples”.
“We’re happy with our position and our Financial Ombudsman Service record,” Homer adds. “The providers who led the move of publishing stats have a certain type of business – they have short deferred periods and so pretty much pay everything. We don’t want to get into a tit for tat situation where we do something and another company does something else.”