SHOW US YER STATS!

Income protection providers are coming under increasing pressure to publish their claims statistics. But should the industry focus on the more positive message of rehabilitation? Emily Perryman reports

The income protection (IP) industry has spent countless hours debating how to reverse dwindling sales. Suggestions put forward have included boosting awareness among consumers, educating advisers and streamlining the underwriting and administration process.

But a recent poll of IFAs by industry analyst Defaqto indicates that providers need to take a step back and ensure the product does what it says on the tin: pay claims. The research asked advisers to rank the most important service and satisfaction disciplines that providers should have. Attitude to claims – or treating claimants fairly and paying claims wherever possible – came out on top, above administration, commission, underwriting and brand.

An optimistic reading of the results suggests that advisers want what is best for their clients – and being treated fairly at what could be a very stressful and frightening time is clearly important. But Defaqto, giving a somewhat pessimistic interpretation of the research, said the results underline the lack of confidence that consumers and IFAs have in insurers to pay claims. Despite calls from many people in the industry, the majority of providers still refuse to publish their IP claims statistics – a decision, Defaqto said, which may cause people to think insurers have something to hide.

“There is a crisis of trust evident in the IFA research,” the report states. “Clients, but more importantly IFAs, do not trust insurers to pay out. The current bad press surrounding MPPI will inevitably tarnish IP too. Insurers must remove from the contracts all aspects of the underwriting and processing of claims that can appear arbitrary or unfair and must move to publish claims statistics as soon as possible. Restoring the confidence of IFAs is the first step so that they can be strong advocates of IP and its value to clients.”

INDUSTRY FRAME WORK

At present there are just six providers that are known to publish their IP claims stats: AEGON Scottish Equitable, Cirencester friendly, Dentists & General, Holloway Friendly Society, LV= and Pioneer. The largest IP provider, Friends Provident, says it does not believe publishing stats would be beneficial for the industry as a whole.

“I don’t think publishing critical illness (CI) stats did us any good,” says Mark Jones, head of protection at Friends Provident. “It did focus us on what caused problems, but it also created the ‘20% of claims are turned down’ mantra, which people still latch onto. Another problem is that if a provider pays an IP claim it could assert to be making a decision every month, so the stats would be open to manipulation. If they said how they make a decision, people don’t want that level of detail.”

Meanwhile, the industry’s second largest provider, Norwich Union Healthcare, says it will only publish stats if every other provider does too. Senior propositions manager Nick Homer believes there needs to be an industry framework specifying how providers should publish stats so that people can “compare apples with apples”.

“We’re happy with our position and our Financial Ombudsman Service record,” Homer adds. “The providers who led the move of publishing stats have a certain type of business – they have short deferred periods and so pretty much pay everything. We don’t want to get into a tit for tat situation where we do something and another company does something else.”

Zurich is happy to share information about the proportion of claims it declines for non-disclosure – which fell from 7% last year to 3% – but says data about the amount of claims declined in general could create problems.

“If the industry could come up with a clear way of publishing stats and was consistent about what counts as a claim, it would be good for all concerned,” says Phil Brown, director of underwriting and claims at Zurich. “But we need to do this before we go out publicly with the numbers. Another issue is whether the market gets into an ‘our data is better than yours’ league table – I don’t think that would be a good thing at all.”

REPUTATION

Insurers that refuse to publish their stats, however, could be contributing to the low levels of trust in the industry. Rod McKie, head of marketing for individual protection at AEGON Scottish Equitable, the most recent provider to publish IP claims stats, says it did have concerns about how people would compare the results and the different ways in which insurers classify a claim. However, highlighting to consumers what IP can do for them outweighed these concerns.

“We didn’t want to highlight comparisons, but to show the importance of IP,” says McKie. “Our decision has been well-received in the marketplace.”

What’s more, some providers believe that publishing stats helps them to explain why some claims are not successful, rather than just focusing people’s attention on the declined claims figure.

Paul Hudson, chief executive of Cirencester friendly, says: “It is important that customers understand the reasons why claims are paid and why sometimes it is not possible to pay claims. Unfortunately it is easy to focus on the negative rather than the positive, and to be able to address the negative – i.e. claims being declined – it is important to understand exactly why this is so. This process of education of the customer is important and fits in with Treating Customers Fairly and the education of consumers generally.”

Advisers who have been pushing for claims stats publication can look forward to data from AXA in the near future. Stuart Lawson, protection marketing manager at AXA, says it has not published its claims stats to date because it has only been in the market for a short time, but believes it is important from a transparency point of view.

“Given the greater profile of stats in the industry – for life and CI – we see it as a good thing. AXA is very much into paying claims and publishing stats is something we are looking to do. Three to four years is when a book of business is large enough to make stats meaningful, which is why we are doing work on it now.”

REHABILITATION

Some insurers, however, point out that while IP is primarily about paying someone an income if they cannot work due to illness or injury, it has other benefits too. The majority of providers now offer services that help claimants get better and return to work – services that are traditionally the preserve of the group IP market. Friends Provident’s Jones believes it is this that the industry should focus on.

“Providers have been nervous of talking about rehabilitation services in the past because they don’t offer them to all claimants,” he says. “But we should have confidence in saying what we do. I’m very keen to promote the fact that first and foremost we want to help people back to work, and if we can’t that is when the income kicks in.”

Advisers must be careful not to tell clients that they will definitely get this kind of support. Legal & General does not offer extra services for its individual IP product, despite doing so on the group IP side.

“IP is a very small percentage of our overall business, so we don’t tend to offer extra services,” says Russ Whitworth, underwriting and claims director for L&G. “It is a call as to whether an insurer tries to charge a bit extra on premiums in return for services, or whether they try to compete on price alone.”

Insurers that do offer rehabilitation and return-to-work services will make an assessment of whether someone will benefit from extra assistance and whether it will be cost-effective. LV=, for example, would offer Red Arc – a service providing information, advice and emotional support – to people with, say, cancer but not to those with a broken leg.

RETRAINING

Other services offered by providers include retraining and CV writing to help people back into the job market. Some may also pay for private healthcare treatment so that an individual can avoid long NHS waiting lists, while others – including AXA and Cirencester friendly – may visit the claimant at home to decide what support would be appropriate.

A few years ago, Norwich Union paid to retrain a painter as a locksmith, as an injury meant he could no longer perform his previous occupation. The insurer paid for the retraining, provided him with a van and tools, and added him to its preferred provider list for its general insurance business.

“Most genuine claimants want to get back to work because it gives them a sense of pride and satisfaction,” says Norwich Union Healthcare’s Homer. “If there is a rehabilitation course that we can fund to speed up someone’s recovery we will look at providing this.

Case studies like this would undoubtedly give the industry’s reputation a boost, and several insurers are trying to make them more freely available. But when an adviser is faced with a client demanding to know whether an insurer will actually pay out, only hard evidence in the form of claims statistics will help.

THE MOST IMPORTANT IP INSURER DISCIPLINES
DISCIPLINE RANK

Source: Defaqto ‘Income protection in the UK: Nobody’s child’

Attitude to claims

1

Claims administration

2

Underwriting

3

New business administration

4

Staff competence

5

Treating customers fairly

6

Technical assistance

7

Product design & innovation

8

Existing business administration

9

E-business services

10

Marketing support

11

Strength & brand

12

Broker consultant services

13

Commission/fees administration

14

Commission level

15

REHABILITATION CASE STUDIES

Source: LV=

• A 40-year-old solicitor had been claiming under his IP policy for a period of four years with a depressive illness. It was clear from the medical file that his own doctors were doing little or nothing to rehabilitate him. The insurer introduced him to, and funded, a rehabilitation programme with a private supplier. They worked with him over a period of 12 months and in the end he made a recovery and was able to return to work.

• A 33 year old male bricklayer suffered a back injury which prevented him from carrying out his normal occupation. However, his policy was based on an own or suited definition after 26 weeks of incapacity. The insurer could have terminated the claim on the basis that he was able to undertake a number of sedentary roles such as car park attendant. Instead, it allowed the claim to run for another 12 months while he retrained and then stopped the claim.

• A claimant suffered an epileptic fit. His job required a significant degree of business travel and the benefit level was £17,500 per annum. The insurer agreed at outset to pay a benefit of approximately £120 per week to meet the costs of a driver. The claimant continued to work full time, the insurer saved over £10,000 in benefit and the claim eventually terminated after 12 months when his licence was restored.

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