Common standard would be ‘logical next step’ for industry in continuing to improve confidence
An investigation by Health Insurance into inconsistencies in the way protection providers report their critical illness (CI) claims statistics has reignited calls for a common reporting standard across the industry.
Health Insurance has found that there are significant differences in the way statistics are reported, with some providers including claims for total and permanent disability (TPD), children’s cover and partial payments in their data, whereas others include only some of these, or none at all [see the table below for a comprehensive comparison].
Insurers began publishing percentages of declined and paid CI claims in 2005, which, alongside the publication of guidance on nondisclosure by the Association of British Insurers (ABI), is largely credited with significantly improving pay out rates, as well as improving the credibility of the industry in the eyes of the public.
The latest stats show the major providers paid out between 88% (LV=) and 94% (Aviva) of claims in 2011. But now, many are arguing that more needs to be done.
TPD and children’s claims are generally estimated to account for around 3% of all CI claims each, while partial payments account for a minimal proportion currently as they are a very recent addition to most policies.
Therefore their inclusion or exclusion in statistics is unlikely to make a huge difference to insurers’ pay out rates, but if this is the major benchmark against which the industry is measured in terms of consumer confidence, many believe it is essential providers report their data in the same way.
Protection consultant Kevin Carr says while the publication of claims stats has helped improve both consumer and adviser confidence in recent years, some criticisms remain regarding the consistency used across the market.
“The logical next step would be to ensure that providers are more in line with each other,” he says. “Whether or not a provider includes areas such as TPD and children’s cover is unlikely to make much difference to the overall figures, but the more consistent insurers can be the more confidence advisers will have in the statistics.”
Sarah Fullaway, director at protection intermediary OVISO, believes it is down to the ABI to enforce a common standard.
“For us, claims stats would not be the overriding factor in recommending a product, but you want to be able to say when talking to a client that this is a company that pays its claims, and people do buy into that,” she says.
Robert Morrison, chief underwriter at Aviva, and Mark Jones, head of protection at LV=, also support the concept of a common reporting standard.
Morrison explains that Aviva does not include TPD, child claims or partial payments in its statistics for reasons of “historical consistency”.
TPD, for instance, has been an optional benefit on many insurers’ policies – although Aviva has always included it as standard – while children’s claims and partial payments are relatively recent developments.
Jones, however, says while a common standard would be helpful, focusing on the differences between advisers’ statistics risks damaging consumer confidence.
“These were never designed to be competitive figures,” he says.
In addition to providers’ independent figures, the ABI also publishes its own claims stats for the industry as a whole.