Clive Waller ponders the necessity of claims statistics if insurers are to be taken seriously.
It has probably not escaped your notice that the insurance industry is not the most loved and trusted in the land. We compete with bankers and politicians. That said, much has been done to ensure customers are treated better. But it will never be easy, especially when it comes to claims.
H.L. Mencken once said: "For every complex problem, there is a solution that is simple, neat and wrong." Too many are trying to find simple solutions to claims issues. Bad back and stress are reasons alone to make this subject a minefield.
So it is not surprising that the issue of publishing claims statistics has been a nightmare. In essence, claims are simple. As an old chief actuary colleague of mine repeatedly said, "If our policy holder is too sick to work, we pay."
Sure, we need a doctor to agree to the "too sick" part, but after that, as long as the claimant hasn't knowingly lied, that is about it. Now, if you doubt any of this, please have a chat with anyone you know who is not in insurance. Get the picture?
What is the most important criterion when selecting an insurer? Easy - do they pay claims? All else others are subsidiary. How do we know what proportion of claims do they pay? We ask them. Oddly enough, I haven't heard anyone question the published figures of those who do publish.
Years back, my partner in crime, Peter Le Beau and I tried to get the ABI onside on this issue. It was just like dealing with Sir Humphrey from "Yes, Minister." You can imagine it, "Naturally, we will fully support you. Excellent cause. Of course, it will take a few years.... Be very brave to try to do something now."
Things haven't changed over the years. The ABI's Malcolm Tarling was quoted in the Telegraph on February 13 2013, ""We have worked hard with our members to come up with a formula for collecting that data in a way that is consistent. Companies publishing individual data would not necessarily give an accurate picture and actually be more confusing and inconsistent." Sir Humphrey would have been so proud!
It was all to little avail. Enter income protection evangelist, Roy McLoughlin of Master Adviser, the human wrecking ball of insurers! Roy has been working like a beaver behind the scenes and one by one insurers have agreed to publish claims data, the most recent being Scottish Provident and Bright Grey. Sadly, as I write, I understand that Friends are now the only insurer in the intermediary market still holding out.
For years, Friends have long argued that they would only publish when a common basis was agreed as to what a claim is. Try this one on the public, "We can't agree what a claim is!"
For me the answer is simple. If you are an adviser placing an income protection case, you should look at the proportion of claims paid by insurers you are considering recommending. If they won't tell you, don't recommend them.
In your research on the subject, you should be aware that there are different sectors of the market and some of these will have different claims characteristics - that is what being an adviser is about and why you get paid.
Clive Waller is senior partner at CWC Research
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