Comment: More questions than answers?

Why protection payout stats are needed – they make your job easier

If you’re a financial adviser (and i’m talking about the individual/consumer market here), chances are that you’ve been asked the inevitable question: “But insurers don’t pay out, do they?”

Chances are, too, that you’ve done your best to explain that yes, in fact, insurers do pay out, in the majority of cases.

And while you’ve been busy doing your bit trying to persuade your clients of the importance of financial protection, insurers have been arguing among themselves over how to help you spell this out.

The question of claims paid protection statistics might, on the face of it, seem like yet another of the inward-looking industry debates that fill the pages of navel-gazing trade mags, websites and blogs (not this one of course). But it’s an important debate – and one which could have important implications for your business.

In fact, analysis carried out this month by Health Insurance (page 10) suggests that the major critical illness (CI) insurers paid out an average of more than 90% in 2009 – a 2.3% increase from 2008.

It’s the type of story that’s great news all round: for your business, for your clients and for the financial resilience of UK society too. After all, what does it mean for you, the adviser? Well, put simply, it means that your clients – and potential clients – should have more confidence that legitimate CI claims will receive a payout.

Credit for the increase in CI claims that are paid must go to the Association of British Insurers, which has done a sterling job sorting out the problem of non-disclosure – more claims have been paid as a direct result of that work.

Credit must also go to LifeSearch, the specialist protection intermediary, for campaigning to persuade insurers to reveal those statistics over recent years.

But, of course, there is always the chance that the figures aren’t accurate. For a start, there’s no independent body checking them. We have to take insurers’ word for it. However, the negative PR fallout that would come with revelations that an insurer has fudged their figures simply wouldn’t be worth them doing it.

Then there are the doomsayers that say it’s not important that nine in ten critical illness claims are paid, but rather that one in ten are still declined. Those doomsayers, however, neglect to consider the issue of anti-selection and fraudulent claims.

And then there are the sceptics who, inevitably, will say that statistics can be twisted and applied to mean anything (check out our own columnist Tony Levene for his take on statistics on page 25).

And then there’s the problem of potential comparisons between providers; many stress that it often isn’t fair comparing A with B.

And then there’s the difficult issue of proportionate and severity-based payouts.

Overall, however, insurers should be applauded for their transparency and their hard work in improving nondisclosure – work that has clearly been applied expertly by Britain’s financial advisers – as well as increasing the amount of claims that receive a payout.

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