ProtectionOct 30 2019

The future of protection: Do claims statistics matter?

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
The future of protection: Do claims statistics matter?

For more than a decade, the protection industry has published statistics showing how many claims are paid each year.

Although these consistently demonstrate that most are paid, the public perception persists that insurers duck claims wherever possible.

The most recent claims figures released by the Association of British Insurers and Group Risk Development demonstrate this.

Although they show that 97.6 per cent of claims were paid in 2018, consumer research by specialist advisers Drewberry found that the public thought this rate was only 50 per cent.

Stick or twist?

Given this gap between reality and perception, there are question marks over the value of publishing claims statistics.

This was demonstrated by a poll run by Protection Review.

When asked where next for claims statistics, both ‘Shout louder’ and ‘Do something completely different’ gained 46 per cent of the vote, with the remaining 8 per cent voting to carry on doing ‘More of the same’.

Although opinion is divided on what the industry needs to do next, Roger Edwards, marketing director of Protection Review, says insurers should continue publishing statistics.

“We cannot stop publishing these figures now,” he says.

Key Points

  • The public still thinks protection claims are not paid
  • Some insurers are using protection statistics in their advertising campaigns
  • One option is to create a policy that is 100 per cent guaranteed

“Stop, and the public will think the numbers have fallen, or they will find figures from the past when the percentage of claims paid was much lower.” 

Some also believe that publishing this data is finally beginning to gain traction.

Tom Baigrie, chief executive of LifeSearch, points to a shift in sentiment in protection coverage in the national press, with more positive articles replacing the unpaid claim horror stories that haunted the industry a decade ago.

“Good news takes forever to get through, but the message is getting out there,” he says.

That the message is getting out to consumers is surprising too. Insurers tend to promote their claims statistics within the industry, with the press releases garnering mentions in trade publications.

Unfortunately, as the figures are relatively dry, they rarely receive any coverage in the consumer press.

Given this, Tom Conner, director at protection advisers Drewberry would like to see more consumer-facing communication. “It is great to publish claims statistics, and they are an invaluable resource for advisers when talking to clients, but they will not have much effect if the general public do not know about them,” he says.

Some insurers are beginning to address this.

As an example, Zurich included its insurance claims statistics in a consumer advertising campaign earlier this year.

Putting the figures in front of the public will help to reassure consumers that there is a high probability of a claim being paid, but insurers are also looking at how they can bring these figures to life.

As an example, Aviva published its first UK claims report in 2018, including case studies from customers and employees to show that its claims approach is about more than providing financial support.

Real-life stories

Another insurer that has adopted this approach is British Friendly.

It published a comprehensive claims report earlier this year, including real-life case studies, details of the types of claim it pays and those it declines, and information about the types of people who receive payment.

In addition, the insurer has added the report to its website so it is easily available to intermediaries and customers.

“We believe we have a duty to make claims information readily accessible rather than simply to produce statistics in a once-a-year press release,” says Emma Thomson, product strategist at British Friendly.

She also says publishing claims statistics should just be part of the strategy to drive sales.

Other initiatives include raising awareness of the importance of protection through real-life case studies and more education around the financial risks of relying on good fortune and the welfare state.

Greater use of social media could also help to get the message out to consumers.

Mr Edwards says that using video to get behind the scenes of claims departments would help to create greater transparency.

“It would need to be an interesting story but it could help to make insurers more human,” he says.  

As well as flagging up more imaginative ways to promote the industry’s claims record, there are also calls for insurers to use the same approach when they publish statistics.

Comparisons can be tricky when one reports a figure for claims across its protection range and another separates out the different products.

Adopting some form of standardisation would also help improve consumer confidence. With just one format it would dispel suspicions that the statistics were being manipulated to present the insurer in the best possible light. 

More than marketing

Beefing up the communication campaign is part of the solution, but Martin Shaw, chief executive of the Association of Financial Mutuals, says the perception problem is down to something more fundamental. “The cause of frustration for customers is not whether a claim will be paid but whether the product is claimable,” he explains.

To illustrate this, he points to claims statistics for income protection provided by mutuals. “In 2018, 94 per cent of claims were paid, but only a small minority of policies generated a claim in that year,” he says.

“To pay a premium all through your working life and not get anything back feels like an all-stakes game, with the odds not much better than winning the lottery.”

Insurers are already taking steps to improve the perceived value of protection products, with many adding services that policyholders can use without needing to make a claim.

These include health and wellbeing information and helplines, bereavement counselling and second medical opinion services. 

Taking inspiration from the mutuals, a profit-share mechanism such as that on a Holloway-style income protection contract – offered by friendly societies, combining a low level of income cover with a savings pot – could also be deployed. This would reward policyholders if they did not need to make a claim.

Another option might be to adopt the Vitality model and reward customers for leading healthy lifestyles.

“The industry needs to design products that a normal customer has a reasonable chance of using over their working life and that give them more than ‘peace of mind’ for a lifetime of contributions,” adds Mr Shaw.

Total satisfaction

Alongside strategies to make the current products more attractive to consumers, another potential option for insurers is to create a policy that guarantees 100 per cent of claims are paid.

This would remove any suspicions around the likelihood of a claim being settled.

As non-disclosure is the main reason a claim is declined, insurers would need to take steps such as increasing medical evidence requirements or introducing non-contestability periods to stamp it out. The downside is that this could add time and expense to the product, potentially making it unattractive.

Some are a bit more optimistic about this option, with Mr Baigrie pointing to LifeSearch’s purchase of the trade name Guaranteed Life a few years ago as an example.

“We think it should be tried,” he says. “It would only ever be a niche product as it would need to be a very detailed and thorough underwriting at the point of application. That’s expensive and possibly risky too.”

Claims statistics may be failing to reach as many consumers as the protection industry would like. But, with a variety of additional strategies available to raise awareness of the importance of protection, claims statistics should remain a key part of insurers’ marketing campaigns.

Sam Barrett is a freelance journalist