Nearly £1.2bn was paid out in critical illness insurance claims in 2017, helping more than 15,000 families recover financially after a diagnosis of a serious condition.
Although the product was a lifeline for these policyholders, many individuals are still failing to take out cover.
Figures from Swiss Re’s Term and Health Watch 2018 show that more than 500,000 policies were sold in 2017, taking sales volumes back to the levels last seen in 2012. However, these levels were dwarfed by sales of life insurance, where term-only policies topped 1m.
Consumers’ perception of claims is one of the key reasons why they are shunning cover. Research by Aegon found that just eight per cent of consumers believed the protection industry paid out more than 90 per cent of claims, in spite of figures from the Association of British Insurers showing that 97.8 per cent of protection product claims were paid.
Interestingly, while respondents correctly identified the top two reasons claims were declined – non-disclosure and claiming for something that was not covered by the policy – the third most common reason indicates where insurers may need to focus their attention. The ABI found that many people did not trust insurers to pay a claim, believing they would find loopholes to avoid making a payment.
These findings do not surprise Jacqueline Kerwood, claims philosophy manager at Aviva. “It is important to publish claims statistics but the figures are only really picked up by the trade media: consumers do not see them,” she says. “As an industry we suffer from being tainted by consumers’ negative experiences of insurance.”
To change these perceptions, Ms Kerwood would like to see more publicity around why claims are declined. Given that most claims are rejected due to non-disclosure or because the condition is not covered, this would help consumers to understand how cover works, as well as changing their perceptions of insurers.
“If we explained why we had declined some claims, the man on the street would agree that it is reasonable,” she adds.
Insurers would also like to see more positive stories coming out of the statistics. “It only takes one negative story for it to reflect badly on the industry as a whole,” says Chris McNab, protection proposition director at LV. “We need to put positive messages out there more: there are plenty of life-changing stories about protection claims.”
To achieve this, Mr McNab would like to see claims statistics published more frequently to help them gain a higher profile, but also a campaign such as the Seven Families initiative for critical illness insurance or protection more widely. This campaign originally ran from November 2014 to July 2016, with the families’ stories featuring in the national press.
Unlike the tales that normally make the nationals featuring people having to fight to secure a protection pay out, the Seven Families initiative drew attention to the financial and rehabilitation support that income protection insurers provide.