Justin Taurog urges the industry to go beyong measuring claim stats in promoting the worth of protection insurance.
There has been much focus on claims statistics recently, with protection insurers publishing information to prove that claims are indeed being paid and help show the value of protection.
There's been a lot of progress too with all major insurers now publishing their statistics. And the results speak for themselves.
The latest statistics from the ABI show that in 2013 almost 100,000 claims were paid, totalling over £3 billion across the whole industry. This emphasises how protection has a significant role to play in protecting society, and can help take the strain off of government spending.
For a relatively young company it was also pleasing that VitalityLife has been able to publish some great claims statistics.
In 2014 we paid 99% of life claims, 98% of income protection claims and 91% of serious illness claims. The total amount paid out also increased 66% from 2013 to a total of £25 million, reflecting the growth of the business, and the maturing of the in-force book.
Andrew Jenkinson, director at Drewberry Insurance, said: "The publication of claims statistics is an important part of proving that each firm, and protection as a whole, is open and transparent.
"In our 2015 consumer survey the average response when asked how often insurers pay life claims was 50% when the actual figure is over 90%. People are still underestimating the effectiveness of insurance. So it's great that Vitality are showing the public that these products do exactly what they promise."
While claim statistics help improve transparency and demonstrate that claims are being paid, they do have their limitations which advisers and customers should be aware of, particularly if they are being used to compare providers.
For example, there is still not complete consistency between providers in the way claims statistics are calculated. Also the claims paid do not help compare what's covered by different policies.
For example, the Hannover Re UK Life Branch (August 2014) found that a customer is up to twice as likely to claim on some of the newer more innovative policies compared to traditional Critical Illness Cover, due to the coverage of more conditions and wider policy definitions. Isn't that more important than a provider paying 93% of claims compared to 91%? Don't get caught up in the statistics and end up missing the point.
Top 5 conditions claimed for on Serious Illness Cover were Breast Cancer, Heart Attack, Bowel Cancer, Stroke and Malignant Melanoma.
WHAT MORE CAN WE DO?
Whilst the industry, through the ABI, have moved to greater standardisation of claims statistics and the publication of consolidated claims stats, an industry average of say 92% doesn't assure an adviser that a particular provider is in line with the rest of the market when it comes to paying claims. So what more can we do as an industry to help assure advisers and customers?
Building on the ABI consolidated statistics, should these also include the range of different claim payout levels, showing that there are no outliers within the industry. That way advisers would have comfort no matter which provider they recommended.
The process of collating claims stats could probably be improved too, to ensure further consistency in what provider's submit.
Claims stats are also one-dimensional because they alone do not take into account the nature of cover, the profile of a providers business or how the policies are sold - and these factors will all have a bearing on the ultimate numbers. Maybe the industry should look to provide more metrics that help to quantify the nature of cover, and the underlying demographics to give advisers more context when looking at claims statistics.
The idea of coordinating claims releases has been raised, but is there real value in that? Wouldn't it be better if we all got behind the ABI process to improve on the standardisation of claims stats, and worked towards more transparency - providing the necessary comfort and context to the numbers.
Hopefully this will make it easier for advisers to understand any differences and leaves them to focus on recommending the most appropriate and valuable cover for their clients.
ARE THERE OTHER WAYS TO SHOW VALUE?
If it's about showing the value of protection policies, then there are other possible metrics. How about helping customers understand their health and detect illnesses at an earlier stage, before they become more serious? By providing discounted health screenings insurers can help customers do exactly that.
And this can yield surprises of its own: a massive 87% of people who took a Vitality health check with high cholesterol did not know this until they had a health check with Vitality.
Prevention is better than cure
Health checks are normally straightforward, depending on how in depth the health check you choose. They are a sophisticated check of your vital systems, and is one of the best things a person can do for themselves and the people that depend on them.
Health checks typically include:
• Body Mass Index (BMI)
• Blood glucose (diabetes)
• Blood pressure
• Electrocardiogram (ECG) to identify possible heart problems such as coronary artery disease
• Full biochemistry profile including liver and kidney function
• Cardiovascular risk score
• Lung function test
All of which could identify risk of illness in future. Meaning clients have the chance to do something about it now, not when it's too late. Early detection could be life-saving.
The core of any protection business is to provide peace of mind to customers, and I believe these claims statistics reinforce the real value protection products can provide customers and their families in a time of need.
Paying claims is clearly an important aspect of what we do, and as an industry we are judged on the number of claims we pay, which is why we continue to improve our products and processes to ensure customers get the best possible cover.
But if we can add something more to that, something to help your clients live a healthier life, isn't that better for everyone?
Justin Taurog is managing director of VitalityLife
Bill broadened to include insurable interest in cohabitants, group schemes and trusts
Thursday 4th October at The Hilton London Bankside
Early conversations about end-of-life care are crucial to ensure individuals living longer can make their own decisions, however right-to-die approaches vary all over the world
Group life, critical illness and income protection business bought from Munich Re