IP claims statistics: Small is beautiful

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Mark Myers says that small is beautiful when it comes to some of the smaller insurers' approaches to transparency.

You have probably all seen ‘Have I Got News For You?' Those a bit older will remember David Frost's ‘That Was The Week That Was' and before that, the show that was credited with creating modern satire ‘Beyond The Fringe'.

Well, the satire movement started a long time before that. One of the earliest, and best, examples is a pamphlet called ‘A Modest Proposal' published in 1729 by Jonathan Swift, who had only just released his more famous tale, ‘Gulliver's Travels'.

In A Modest Proposal, Swift mocks what he regarded as heartless social policies of the age by suggesting that the poor can ease their economic troubles by selling their children as food to the rich of Britain.

A Modest Proposal also targets the calculating way people perceived the poor in designing their social projects and regard people as commodities.

I mention this old work of satire because, despite the passing of nearly three centuries, its barbs and observations remind me of certain aspects of modern financial services and particularly our world of protection, where too often as an industry we say one thing and do another.

According to this year's Swiss Re Term and Health Watch report there were 96,889 Income Protection policies sold in 2014. Of those approximately 40% (39,934) were sold by two of the biggest insurers.

Yet if you look at the claims they paid only 85.5% between them. Not a great set of stats but bear in mind that, as these are big companies are primarily focused on making profits, paying claims may not necessarily be at the top of their agenda.

The smaller firms, meanwhile, especially the smaller Friendly Societies, are owned, managed and run solely for the benefit of the members so there are no shareholders to pay with dividends, which may also explain why British Friendly, Exeter Family Friendly, Cirencester Friendly pay 95% of claims between them.

That's why the smaller, efficient Friendly Societies lead the way when it comes to TCF innovation in Income Protection. We led the way with offering the best policies and prices to clients regardless of occupation or gender long before the EU gender neutral regulation came into force and made the big firms do the right thing.

Our focus is not on declining applications from anyone who might be a risk; we believe in giving the best cover possible to our members, not discriminating because of their personal circumstances. When a firm is set up to welcome all types of clients they're more likely to be better prepared to pay claims.

The smaller insurers don't wait for the media and the market to pressure us into doing what's right.

The point is that those of us who work for a smaller company, especially a Friendly Society, work for our members. We are not selling products purely to make money, we are giving a service to benefit our policyholders who are, ultimately, the ones that pay our salary. Centuries ago,

Swift was criticising those that approach social change in a way that benefits their own inbuilt bias, be that political or economic, because everyone naturally views the world through the prism of their own experience.

That's why those of us who work for smaller Friendly Societies are so tied in to doing what's best for the end client, rather than what's best for the business or shareholders. Why? Because the customers ARE our business, in fact they own it!

I believe that combination of small size and company ethos is what makes the likes of British Friendly, Exeter and Cirencester best placed to offer expert and innovative policies to all clients and then keep our promises by paying out on them.

It is also worth mentioning Vitality here as, although not one of the companies with very significant sales in the Income protection market, they do boast claims rates of 98% in 2014 and are also highly innovative.

A firm that is innovative and customer-oriented, it seems, is far more likely to offer high claims rates than big corporations whose key focus may lie elsewhere!

Mark Myers, is CEO of British Friendly 

 

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