There are a number of reasons why group income protection providers may decline a claim. Sam Barrett looks at some of the most common ones and asks advisers and insurers how best to handle what can be an awkward situation
Declined claims are bad news for the protection industry. But while decline rates as high as 25% have rocked sales of critical illness, a very different picture is emerging in the group income protection (GIP) market.
“There’s been very little bad publicity about declined GIP claims, especially in recent years,” says Colin Micklewright, manager of income protection business development at Canada Life. “The industry has put a lot of resource into the claims process, which has helped to ensure it runs smoothly and made sure there’s little misunderstanding from employers and employees.”
The number of GIP claims that are declined is low but, as no official data is collected, it is hard to put a figure on the exact number. For example, while Legal & General estimates that less than 5% of the GIP claims it receives are declined, intermediaries put the industry-wide figure closer to 15%.
This variance is largely because there are no hard and fast rules about what constitutes a declined claim.
“Some claims clearly aren’t valid as there’s no supporting medical evidence and we will point these out to the employer so they don’t submit them as claims,” says Stuart Gray, managing director of Portus Consulting. “But other claims can be less clear. The employee isn’t fit to work but the medical evidence doesn’t support this. These can often be cleared up through the appeals process or by producing further medical evidence.”
He adds that of the 800 or so claims Portus Consulting handles each year, either new or under review, there are only one or two where he is unhappy with the outcome.
The closer relationships that both insurers and intermediaries have developed with employers have helped make the claims decision process fairer. “Our benefits managers meet with employers on a regular basis to discuss any potential claims as well as ongoing ones. This helps to identify claims that won’t meet the criteria for payment,” says Vanessa Sallows, benefits director at Legal & General.
A push on early notification has also helped to ensure that potential declines never actually make it into the claims process. To encourage employers to notify them as soon as possible of a potential claim, insurers now offer access to rehabilitation processes long before the end of the deferred period. “It’s really in the employer’s interest to notify as soon as possible as these services can reduce the length of the claim and help get the employee back to work,” says Dan Lamb, head of group risk at the Jelf Group.
Legal & General has taken this a step further, offering an early notification bonus to GIP clients with 500 or more employees. Providing they report at least 80% of absence that lasts for at least four weeks within six weeks of its start, they will receive a bonus of 5% of the premium.
“This has helped drive down the average length of time it takes for employers to notify us of absence,” says Sallows. “The average used to be 26 weeks but it’s fallen to 13 weeks with many reporting well within this period.”