Underwriting manager says greater transparency and more education can encourage better outcomes
Every year insurance providers release their claims paid statistics for the previous year. And in recent years they've always been roughly the same - high 90s for life claims and mid to low 90s for critical illness claims. But outside of our industry, this isn't really seen as news. There's a preference in the consumer press for stories about unpaid claims and the unfairness of it all. But hopefully, greater transparency and more education will help us to pay more claims. In this article I'll provide a bit more insight into claims and why some don't get paid.
First of all, I don't know any claims assessor whose first thought when they receive a claim is ‘how can I avoid paying it?' On the contrary, in my experience claims assessors start from a position of: ‘What can I do to pay this claim?'. But all claims need to be assessed and this can take time, especially when medical evidence is needed. And every avenue will always be explored before the unfortunate decision is made to decline a claim.
I'm going to look at each of the main cover types, give some insight into why a claim may be rejected and what you, as advisers, can do to help prevent this happening to your clients.
This can perhaps be the trickiest type of declined claim to explain as naturally you'd expect this accept figure to be 100% every year. But there are always claims that are declined because the cause of death is excluded or due to misrepresentation.
Although volumes are small, the main reason for an exclusion to be invoked on a life cover claim is because of suicide. Understandably almost all providers have an exclusion for suicide within their life cover - in the case of Royal London we won't pay out if the life assured commits suicide within 12 months of the start date of the plan.
I'm always shocked to see the suicide rate each year - it's the leading cause of death for men under the age of 50 in the UK*. The importance and understanding of mental health has improved over recent years but highlighting this exclusion to your clients may open up an important conversation with them and the reason why they want to take out this cover.
When it comes to life cover and claims that are rejected due to misrepresentation, the information not disclosed needs to be pretty severe. We're not talking about a slight discrepancy in height or weight, or a typically minor condition like asthma or irritable bowel syndrome. The information usually needs to be so significant that, had it been disclosed, cover would not have been offered. So ensuring that all medical questions are fully asked and answered will help to avoid any nasty surprises for the client's family, should they need to claim. Better to discuss it at the start where it can be evaluated, rather than at the end when it's too late.
It's interesting to look back at old critical illness (CI) claims statistics, as CI definitions have generally become wider, covering more over time. Now we pay claims every year for ductal carcinoma in situ, an early form of breast cancer, when in years gone by it would have been excluded. But claims being declined due to definitions not being met does still happen - CI definitions won't cover everything, so reviewing the cover that a client has in place to make sure it continues to meet their needs is important. It's also crucial that your clients fully understand what they're covered for and what they're not - not all protection plans are the same and the number of basic ‘no frills' protection plans seem to be increasing.
Misrepresentation, however, continues to have an impact on why claims are rejected. I know all protection providers say this but I can't stress enough that it's better to include too much information on the application than not enough - let the underwriter decide if it's important or not. And if you or your clients are unsure about anything - you can always ask the underwriter handling the application, as they should always be able to give the help and support you need.
A significant challenge with income protection is ensuring the cover selected is appropriate not only at the outset but that it continues to be suitable years down the line. This can have an impact at claim stage if, for example, the applicant doesn't know what benefits they get from their employer in the event they're off sick. And if your client changes job and receives an improved benefits package this could mean that their income protection plan should be adjusted too. This is because an employer's sick pay package could directly impact the amount of cover required and also the chosen deferred period.
This can usually be avoided by making sure the client fully understands their employer's sick pay arrangements and also by reminding them to notify you if they move jobs - this could seriously impact the cover they have in place and may even result in them not needing as much cover and consequently reducing their premium. Scheduling a regular catch-up to check in with your clients is another way to review their cover and to see if their circumstances have changed.
An income protection claim that doesn't meet a definition is less of an issue with the own occupation definition - where someone is unable to do their own job through sickness, accident or injury. This definition is now offered as standard by most providers and is clearer and easier to satisfy. Some older plans though may use the any occupation or work tasks definition where meeting the definition can be harder. So it may be worth checking the terms and conditions of any old plans, as it may be another opportunity to review your client's cover.
The claims checklist
With protection claims, we're always looking at ways to pay more and the percentages of claims that aren't paid are always very much in the minority. But to provide further support, we've produced a helpful claims checklist. Simply running through this at the application stage will not only help your client should they need to claim, it'll also help to highlight the value of your advice, which will be all the more valuable and rewarding when your clients have their claim accepted and they receive the support they need at their time of need.
Craig Paterson is underwriting manager for Royal London
*Source - www.mentalhealth.org.uk (September 2018).
35 regulated firms in default
3% cashback each month
Following Albany Park partnership
Part of ‘Vitality Pink’