Protection claims statistics

Protection claims statistics

With figures well in excess of 90 per cent, protection claims statistics should go a long way to winning consumer confidence in these products.

But, as sales remain resolutely flat, the protection industry is questioning whether publishing this data is the best way to promote the benefits of taking out cover after all.

The claims statistics certainly make reassuring reading. According to the latest figures from the Association of British Insurers (ABI), the percentage of claims paid for term assurance, critical illness insurance and income protection during 2013 were 98.4 per cent, 91.8 per cent and 91.1 per cent respectively.

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These statistics also point to huge improvements in the chances of getting a payout. For example, ABI figures show that 10 years ago, 20 per cent of critical illness claims were declined.

But while these figures give insurers and advisers plenty to shout about, the message is failing to get through to consumers.

Although Swiss Re’s Term & Health Watch 2014 relates to 2013, when the market was recovering after all the gender directive activity at the tail end of the previous year, it shows a significant decline in new business across the board. Income protection sales slumped by 24.4 per cent, critical illness by 20.5 per cent and term assurance by 17.4 per cent.

Consumer sentiment

Research among consumers highlights some of the issues. First, although statistics are being published by individual insurers and the ABI, the public already has preconceived ideas about the percentage of claims that are paid.

This was illustrated by Protection Review research from 2013. It found a significant gap between perception and reality, with consumers believing that only 38 per cent of claims were paid each year.

Some of the blame for this must lie with payment protection insurance (PPI). Although the nature and claims payment records of PPI is very different, the similarity in names means that protection products such as critical illness insurance and income protection also suffered reputational damage when the PPI mis-selling scandal broke.

While the protection industry has taken steps to distance itself, with the banks still sitting on billions of pounds of reserves to settle liabilities and the claims companies continuing to push their services, consumers’ confidence in protection of any form remains seriously dented. Dougy Grant, protection director at Aegon UK, says this public perception is affecting sales. “Consumers see insurance as a dirty word, which is a shame. We must do more to ensure they understand the benefits.”

A difficult message

Alongside the seemingly unshakeable association with PPI mis-selling, research conducted earlier this year by Aegon UK highlights another reason why consumers’ view of the protection industry is so poor. It found that 77 per cent of consumers did not know these statistics were published, with only 32 per cent of them saying they had discussed claim rates with their adviser.

As a result, the claims history of the provider was considered the lowest influencing factor among those who took out cover. Instead, price was found to be the top consideration followed by product features.