Advisers are split in their support for a Financial Conduct Authority initiative to help consumers compare protection providers and products, with some questioning the motives of the move.
The regulator plans to produce claims ‘scorecards,’ which will take data from insurance product providers and compile and present it on the FCA’s website in an “easily accessible format”.
They will include how often consumers are likely to claim on a product, how likely those claims are to be accepted and the average claims pay-out.
Private medical insurance, critical illness cover, and income protection are the within scope of the project, an FCA spokesperson confirmed to FTAdviser.
Christopher Woolard, director of strategy and competition at the FCA, said publishing a range of information will help boost competition between firms, “encouraging them to focus on improving the value and performance of their products, whilst giving stakeholders and consumers more insight into the value they offer”.
Protection advisers have broadly welcomed the move.
“Publishing claims is fantastic,” Emma Thomson, life office relations director at LifeSearch, said.
“But if the FCA really wants to do something it needs to get them on the Money Advice Service – helping consumers understand that protection polices really do pay out is really important.”
Michael Aldridge, innovation director at L&C Mortgages, said consumers need to have “enough information to make an educated decision on the appropriateness of a product before they buy”.
Over-reliance on claims figures could raise problems, however, advisers said.
“Claims information wouldn’t necessarily be relevant to now or the future, due to historic differences,” Alan Lakey, founder of Highclere Financial Services, said.
“The problem is determining why claims were declined. I’ve seen claims for permanent total disability turned down because the person claimed for a broken leg, when obviously that does not qualify.
“There is grave potential to mislead the public, despite best intentions.”
Mr Lakey questioned whether the FCA should even be trying to rate providers.
“The industry already produces enough claims figures, except closed companies, and they should be forced.
“It is not for the FCA to involve itself. It almost seems as if it is trying to find a problem rather than a solution,” he said.
However Roy Mcloughlin, IFA at Master Adviser, said mandatory declarations on claims statistics by protection product providers is “essential if an adviser is to have faith in delivering the message that polices do pay out”.
“Remember that research tells us that the distrust the public has is still at an unacceptable level.
“We do not desire league tables. However if we don’t deliver this evidence then the consequences will be fatal as the consumer and adviser faith in these essential products will diminish.”
Initially the FCA will carry out a pilot on a small number of insurance products, to be determined in the lead up to launch in the summer.
The results of the pilot will be used to inform any consultation on the usefulness of the FCA’s chosen measures.