Providers of critical illness (CI) insurance paid out, on average, 90.6% of claims in 2009, according to statistics analysed by Health Insurance.
This represents a 2.3% increase on last year’s figures with some providers significantly increasing their proportion of claims paid, including those with less established books – which are therefore more vulnerable to questionable claims – such as Bright Grey which reported a 10% increase.
Following the introduction of the Association of British Insurers’ guidance on nondisclosure in 2008, the proportion of claims declined has continued to drop, in many cases to below 2%. Both Skandia and progress from Royal Liver reported no claims declined for this reason. Colin Jelley, head of financial planning at Skandia, said the provider hoped to replicate this result in future years.
“No one can predict the future, but we intend to continue with our current process which is working, as well as listening to feedback from advisers and clients so that we continue to make improvements,” he said. Jelley attributed this year’s result to the quality of the provider’s underwriting system and application process.
“It’s rare that a client intentionally fails to provide medical information so transparent communication with clients when they take out the policy, along with a clear set of medical questions, are key in reducing the number of incidents of non-disclosure,” he said.
Ed Stuart-Brown, head of protection at Friends Provident, which paid out 92.6% of claims last year, paid tribute to the involvement of IFAs in reducing non-disclosure.
“At the end of the day, providers are in a little bit of a reactive position on this and you have to give credit to IFAs for the work they have done with clients,” he said, while questioning whether it was possible to ever completely eradiate non-disclosure.
“I almost wonder whether, at the level we are at now, it doesn’t matter what the IFA does, some clients simply won’t disclose,” he said. “All an IFA can do is to continue to spell out implications of not disclosing.”
Advisers expressed sympathy with Stuart-Brown’s view.
“Totally eradicating non-disclosure isn’t really possible in my opinion because you will always get a small number of clients who decide not to tell the truth regardless of the warnings,” said Matt Morris, head of media relations for specialist intermediary LifeSearch. “It’s great that some insurers can boast zero per cent on their stats but we won’t see those figures as the average across the whole industry. What we must do is get those figures down to just a couple of per cent and keep them there, which is what many insurers have achieved.”
Chris Hulme, director of the Clayton Hulme Partnership, an IFA based in Manchester, suggested that that a low proportion of claims declined for nondisclosure could indicate a more lenient approach to assessing claims.
“It’s either a phenomenally good medical underwriting questionnaire and viewpoint at application stage or there is a degree of leniency within the claims process,” he said. “Either way that insurer will do very, very well in the marketplace going forward.”
Hulme warned, however, that the statistic could be a “double-edged sword” if people started to spy an opportunity to see “what they can get away with”.
As the furore over declined claims subsides, providers are increasingly focusing on improving the experience of clients at claims stage. While AEGON is heavily promoting its teleclaims service, which it claims can halve the time between claim and payment, Friends Provident is highlighting the personal approach provided by its dedicated claims handlers.
“If you took a policy out 10 years ago it would have been handled very differently to the same policy paying out today,” said Stuart-Brown. “One thing we have not promoted very well as an industry is adding services improving the whole claims process that apply to policies taken out 10 years ago. There is a level of improvement there that we have undersold as an industry.”