Insurers are used to being called many things -– but not all of them in public. So when parliament accused them of sharp practice, exploiting loopholes, and unscrupulous behaviour, had our politicians started their millennium drinks too soon? The debate did take place in Westminster Hall rather than in the Chamber of the House, so perhaps that accounted for the ferocity of the language being used. All the accusations were there: lurid advertisements, moving goalposts, nightmare of legal action. But all these were used during a debate in the historic final sitting of the 20th century to describe insurers’ claims handling practices.
The topic was income protection (IP) claims and MPs had assembled armed to the hilt with constituents’ claims files. They launched into battle to fight on their behalf. While the number of cases raised could have been counted on one hand, it was alleged that those claimants had been harshly treated by insurers at a time when they were at their most vulnerable and least able to fend for themselves. Punished for being ill by those cruel tyrants, insurance companies. Nothing new there then, I hear you say. But is there? The insurance industry has grown to expect emotional and damning comments from disgruntled claimants who, in the vast majority of instances, had their claims justifiably declined. However, on this occasion, these comments were made in the seat of democracy by our elected representatives and in an environment of massive influence.
So, were insurers being fairly criticised for their approach to IP claims management and, for what appeared to be equally important in the debate, their attitude towards individual claimants? Is the drive for short term results and increased shareholder value meaning that only lip service is paid to sympathetic claims handling? Or have the MPs raised issues over only a very small number of cases which don’t reflect the real picture and in truth account for an extremely small percentage of the total?
Unum was one of the insurers named in the debate. It pays IP benefits of £67m to some 5,500 claimants and points out that the number of cases in dispute are a tiny proportion of the claims it handles.
Bob Cheesewright, technical manager of Unum, comments: “Following the parliamentary debate, we have dealt directly and swiftly with the minister, the MPs and the individuals concerned on all the issues raised.”
And, in fairness to the insurers, there surely can’t be a more complex product area of insurance claims handling than that of IP. The claims manager’s nightmare is created through the large number of cases that fall into the area rather charmingly referred to as `grey’. These doubtful claims submissions still occur despite admirable efforts to clarify definitions of disability and use plain English wording.
It’s probably true to say that, with a few exceptions, for most insurers, IP claims handling expertise is vested in a small team of individuals, reflecting the fact that although these claims can be extremely costly the numbers are in relative terms, fairly small.
Could insurers identify areas of overlap with, for example, the rehabilitation issues in the handling of motor and PMI claims and find a practical way to extend the expertise and expand the base of sympathetic customer interface? After all, customers view these policies as being just insurance. The core skills in dealing with customers at times of high emotional crisis are identical whether the insurance cover is IP, PMI or motor.
And perhaps a contribution to cost management could be realised through expertise pooling since claims managers firmly believe that rehabilitation can be one of the most effective routes to cost control.
A major criticism from MPs in the debate focused on what they suggested were methods used by insurers to `prove’ there was no valid claim. Putting effort into rehabilitation across a range of covers could deliver a strong message to aid consumer satisfaction and confidence. In order to promote an understanding of the processes and approaches to claims handling, Unum has extended an invitation to the minister and MPs to visit its offices, giving them open access to all the procedures involved. It will be interesting to see how many accept.
The reality is that IP claims handling takes place in an emotional arena requiring the patience of a saint.
And one could also say that insurers are in the typical no win situation, with action groups aplenty snapping at their heels. One such organisation is The Permanent Health Support Group, a self-support team which claims a 10 year track record in supporting claimants and helping them to decide whether to go to the ombudsman or take a legal route.
John Sharpe, its spokesperson, says: “IP insurance is a dead loss for everybody.” He adds: “If the insurance company doesn’t play the game hard then it can’t make any money. There is only one set of malingerers and that’s the insurers in the way they hold up claims.”
However, the tide of criticism may soon be turning, thanks, in great part, to work the industry has taken upon itself. The recently agreed definitions following the Association of British Insurers’ statement of best practice and the resulting key features documents are a step in the right direction to change this perception. This development could in time provide clarity and assistance for consumers.
The new approach was developed for the individual market where, on the face of it, although the issues are similar, individual covers do not create the same potential for misunderstanding and stand-off positioning as might be the case with group.
The direct access that the claimant has to the ombudsman is one factor and of course the contract is between the individual and the insurer. And without a middle party in the individual IP equation, concerns about the continuing existence of a workable relationship between employee and employer, which can be paramount on group policies to a satisfactory long-term claim, are not really an issue.
However could this be too much to ask in today’s world? How long does an employer maintain contact with the long-term disabled employee?
With individual business, there is no future pricing implication for the individual at claim stage, but, with group cover, insurers attempt to nurture a close and mutually beneficial relationship with the employer and, in many instances, their adviser.
Cheesewright adds: “In future, employees in group schemes will have speedy access to justice without incurring cost in the event of dispute.” This is a result of the Contracts (Rights of Third Parties) Act. It states that, should a disagreement be over contract terms, then an industrial tribunal is the route. However, when access to the ombudsman via third party rights under FSA consultation paper 33 is in place, that access is open to employees when they are not happy with the insurer’s handling of the employer’s IP claim.
The recently formed organisation Group Risk Development (GriD), with membership covering insurers, advisers and reassurers, considers ways to promote and develop the benefits of group risk cover. Naturally the members have concerns about the strong views expressed by MPs in the parliamentary. debate. However at a meeting on February 22, GRID decided that it is in the best interest of the industry that it does not respond since the comments were made within the environment of parliamentary privilege.
It does, however, believe that the follow up with individual MPs and others by companies mentioned in the debate is the correct way forward. “GRiD fully supports the way in which these companies are dealing with the matter,” says Ken Richart, secretary of GRiD and group risk specialist at Swiss Re. “The percentage of claims in dispute is very small indeed. Any formal comment or response by GRiD is only likely to stir up and prolong the debate.”
Few need convincing of the merits of IP, whether the benefits arise from individual or group policies. Yet the market penetration is still surprisingly low. Awareness levels are often quoted as a reason, but research does indicate that consumers do have concerns over cover that requires the commitment of an insurer to continue to pay benefits over prolonged periods.
This may account for the apparent success of critical illness cover in the individual marketplace, seen to deliver in the event of a specific happening.
The adjournment debate on the last day of parliamentary business before the century and millennium drew to a close could yet provide the open door to the new world of IP. When the House of Commons pension scheme was examined to see if there might be scope for improvement, it came to light that members of parliament do not have IP. One honourable member suggested that not only was it desirable for as many people as possible to have IP but it would also be wise cover for members themselves.
A move which could stop the name calling – and lead to a better understanding of the issues.