Jeff PrestridgeAug 7 2019

Protection’s public image

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
comment-speech

It is also considered too expensive and although the era of payment protection insurance is coming to a welcome end, its shadow casts doubts in many minds that all forms of protection cover pay out for the few, not the many.

Thankfully, the image of financial protection insurance – especially that of critical illness cover and income replacement – is slowly improving. And, with it, the reputation of the insurance in the eyes of those who put together the personal finance pages in the national press.

I know many investment-oriented financial planners who have recently rediscovered their interest in protection insurance and attended for the first time the annual conference organised by Protection Review – where the only topic is financial protection cover.

Sally Hamilton, my colleague at The Mail on Sunday, recently wrote an informative article on critical illness cover. This looked beyond the propensity of this insurance to meet claims (this should be a given) and described some of the additional benefits that it now comes with.

These include everything from children’s cover (automatic or as a paid-for extra) and access to second medical opinions to counselling services for those reeling from trauma or fallout from a marriage breakdown.

Ten years ago, such a personal finance article could not have been written. The industry has come a long way – hallelujah, I say.

It is a point acknowledged CIExpert’s Alan Lakey, who believes some insurers are making critical illness and income replacement cover more appealing and simpler to understand.

Reducing the number of policy conditions, stripping out unnecessary policy wording (in Lakey’s words, “extraneous verbiage”) and extending the breadth of cover are all essential, he says, if financial protection insurance is going to become what it should be – an essential building block of a household’s finances.

“Overcomplexity,” he says, “is a turn-off for advisers and leaves consumers bewildered.” Absolutely. Spot on.

One of the most welcome trends in the industry is the publication of claims statistics by providers – a point I made back in June. 

This data has been transformative, providing overwhelming evidence that most insurers meet most claims (90 per cent and above).

Yet I believe more should be done in this key area. Some issue splendidly detailed data (Zurich excels), a few provide data grudgingly, while others simply refuse to play ball. All rather unsatisfactory.

Given this, it is most welcome that consumer champion Fairer Finance, Protection Review and the Protection Distributors Group (with a little help from myself) have got together to make claims statistics fit for purpose.

The burning objective is to ensure that data published is honest (an absolute must), consistent across providers and issued promptly.

The approach has two stages. For 2020, the group wants to ensure insurers adhere to a four-point plan. 

For 2019 data, insurers should provide the percentage of claims paid, split by product type – life, critical illness and income replacement. This should be supported by figures for the number of claims made and the amount paid out. Declined claims should be categorised according to reason (for example, non-disclosure of key medical facts). All data should be published no later than the end of March.

I would like to see a fifth point added – a duty on all providers to publish data, irrespective of whether they are still selling cover. This could come from the Association of British Insurers or the Financial Conduct Authority.

If this happened, comparative claims tables could then be published on the ABI or FCA websites, enabling advisers and consumers to get an idea of insurers’ claim-friendliness.

Grander plans are envisaged under stage two of the charter – although they are very much wishes and hopes rather than givens.

The groups believe the way forward is for financial protection insurers to be far more transparent in their dealings with customers.

So they would like to see data published on the average time it takes to pay a claim, as well the percentage of claimants who received more than money (for example counselling or access to a second medical opinion).

They would also like to see data brought to life with examples of real-life cases where claims were accepted, rejected or resulted in additional support.

They would also like to see data on the percentage of applicants insurers refuse to issue cover to – as well as the percentage of policies set up where the premiums are loaded.

This claims statistics charter is brave and bold. No doubt, some insurers and reinsurers will balk at it and throw their toys out of the pram.

But it is where the financial protection insurance market should be heading – and at a mighty fast rate of knots.

If it gets there, I am sure that the cover will become what it should be – a must-have piece of household financial furniture.

Jeff Prestridge is personal finance editor of the Mail on Sunday