Surveys suggest only around 1 in 10 UK employees have income protection insurance, yet as Which? says ‘The one protection policy every working adult in the UK should consider is the very one most of us don't have - income protection'.
The majority of people rely on the ability to earn an income, uninterrupted, over the course of a forty year working life, and not many could survive on state benefits for long. Is a reason why so few protect their income against illness or injury because they lack confidence that their insurer will pay a claim?
By publicising their claims figures, an insurer demonstrates they stand by the implicit promise made to a customer at purchase - that a valid claim will be settled promptly and fairly. The more this happens, the more the public will be able to trust providers. But when comparing figures, it is important to define what exactly a policy covers so people can compare like for like; for example, some policies are more comprehensive than others.
Giving greater explanation about typical reasons for refusing claims would also be valuable. People need to fully understand what a policy provides and to be clear about the need for full disclosure of any health or medical conditions which the insurer requires in order to offer cover.
A further benefit of transparency in claims stats is that it should encourage insurers to ensure that their product material and claims process are described in plain English, free from industry terminology which could make people think protecting their income is complicated and that it is hard to make a claim.
This needs to be supported by effective training for internal staff and intermediaries. What the published claims figures cannot reveal is how many rejected claims are the result of a misunderstanding about what the policy included (or excluded), because the client didn't fully comprehend what their IFA was proposing, or because the advisor was uncertain about the policy terms.
If all insurers publish their claims stats, it will help convince the public that having income protection cover in place is not a luxury, but should form a fundamental part of their financial planning.
David Zerny is marketing manager at PG Mutual
PG Mutual reported in March that it paid 98% of income protection claims in 2012.
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