In an ideal world, you pay for an insurance product, it then pays out when needed.
No further questions asked. The reason we don’t see 100 per cent claims paid statistics each year (although it’s not that far off) is that complications creep in.
These can often come in the shape of misunderstandings on the part of customers, either caused by confusing insurer-speak on a document, lack of adviser help and support, or simply failing to read the information provided upfront.
In short, getting things right at the initial application stage is crucial.
Claims statistics for the life and health insurance industry are good. So, when we talk about getting more claims paid, we’re really talking about making up a relatively small number to get to a full house.
This can arguably be fixed by insurers and advisers helping all customers understand product nuances – specifically what they can and cannot claim for - and the importance of full disclosure at outset, thereby largely preventing underwriting and associated issues at claims stage.
A problem that is less straightforward to fix, however, is how to lead more people to even consider, let alone apply for, protection cover.
For life, income protection (IP) and critical illness (CI), there’s an issue of trust and transparency that has to be overcome. A large part of this involves looking at ways to help the previously insurable get cover.
It shouldn’t be the case, for example, that at a time when government, the healthcare system, charities and workplaces are doing much to help de-stigmatise mental health issues, underwriting in the insurance sector has the potential to interpret mental health disclosures unfairly.
For private medical insurance (PMI), the issue is more one of how to reduce cost to help make the product more accessible.
At the moment, it is out of reach for most in the personal market thanks to ever-increasing premiums, caused by a combination of rampant medical inflation and insurance premium tax (IPT) increases.
For companies, PMI is just about holding its own with many companies looking at ways to reduce the cost of claims.
Perception vs reality
In encouraging more people to consider protection, an image problem has to be overcome. Nearly half (48 per cent) don’t trust insurers to pay a claim, according to the latest research from The Syndicate, entitled An examination of consumer attitudes to protection insurance.
Yet the fact of the matter is that virtually all protection insurance claims (97.8 per cent) were paid in 2017, according to data published jointly by the Association of British Insurers (ABI) and Group Risk Development (Grid) in May 2017.
Overall, the insurance industry paid out a record £5bn in protection claims last year – representing an increase of more than £340m year-on-year.