No, I’m not saying that. In fact, we are happy to disclose certain claims information in circumstances where a customer has had a premium loading. We fully understand the need for you as advisers to be able to explain to your customer why their premium is higher than expected. But that’s the only justification for disclosing this information.
Ultimately, there are few other instances where disclosing claims experience would be either meaningful or relevant but lots of reasons why disclosing it might be open to misinterpretation and misused, ultimately to the detriment of customers.
This is an issue which the industry has been debating for many years. As a relative newcomer to the market, our take on the issue may be slightly different. The lack of progress appears to be the result of differing positions and motives on the part of leading insurers. It’s understandable why larger insurers would be concerned about exposing themselves to the potential loss of low-claiming business which is vital to balance their portfolios. On the other hand, there is no doubt that sharing claims information would support more accurate and consistent pricing at a scheme level, while reducing the risk of misinformation and the dependence on confusing switch underwriting declarations.
It seems that there are two key strands to the debate: first, the impact on pricing; and second, the impact on the customer. In a market where price has become such a dominant criteria in the switching of business, pricing strategies will always differ as part of the competitive landscape. Ultimately those insurers that deliver against the customer and adviser needs will succeed. We all know that what customers and advisers want is for pricing to be fair.
All kinds of other insurance products take client claims into account when setting pricing, and it is something that we have come to expect. That’s why this issue is not simply about providing or sharing claims information – which in itself does not satisfy the customer need – but about the impact that claims information has on what the customer pays.
Product features like profit shares for small group PMI clients (PruHealth offers a profit share of 25% of the difference between the premium paid and the claims made in every policy year, for example) provide the customer and their adviser with the confidence that their premiums will more fairly reflect their claims. With PruHealth, the profit share is applied to the renewal premium and, in 2008, this resulted in PruHealth’s small group clients reducing their premium increases by around 6% (on average), resulting in an average premium inflation (after the application of profit share) of less than 2%. With this kind of approach, customers who have low claims benefit from lower premiums, feel that their premium more fairly reflects their claims and as a result are much more likely to continue to renew their PMI scheme each year. In the current economic climate, anything that helps to encourage small businesses to continue to purchase their PMI plan will be invaluable.