Blog: Why IP providers need to be more transparent

LV= income protection product manager Martin Sincup says advisers should push IP providers to reveal their claims stats.

I was talking to an adviser recently about the topic of publishing claims statistics for income protection (IP).

He believed passionately that insurers should be open and honest about how many claims they pay. To the point that when discussing IP, he asks his clients if it is important to them that he recommends an insurer that he can evidence has a track record in paying claims.

The answer, he said, is invariably yes. Meaning 12 out of 18 key IP providers are ruled out on the basis they have not published IP claims stats, leaving him with a choice of six providers.

The adviser in question is entirely comfortable with this approach. He is distrustful of insurers that will not say how many claims they have paid – after all, it makes sense that if an insurer pays claims, then they would be happy to tell people about it. If an insurer does not publish their claims stats, they may have something to hide.

This was the first time I have heard of an adviser doing this, although I am sure there are many out there doing the same.

Some advisers might think this is a hard line to take when selecting a provider. But it can only be fair to give a client the choice, and if more advisers took this approach then I am sure we would see more insurers publishing their IP claims stats.

Kicking cynicism into touch

Probably one of the biggest advantages of having claims stats to hand is it provides advisers with the right ammunition to deal with one of the biggest objections to insurance: “Yeah, but they’re not going to pay out anyway, are they?”

It is hardly surprising the public has this view. No doubt millions recently watched a primetime BBC show lift the lid on the insurance industry, with a range of horror stories about declined claims across a range of insurance, including life products. If I was a member of the public, sat down with an adviser the day after that programme aired, talking about the importance of income protection, I would be forgiven for wondering if there was not something more fun I could do with £50 a month?

The fact is providers do pay IP claims, with those that are publishing stats showing at least nine claims out of every ten are being paid.

Most IP plans are now medically underwritten up front. As an industry we have got better at collecting the right information before we offer cover and advisers are aware of the risks of non-disclosure, which helps make sure there are no nasty surprises when it comes to paying a claim.

Application forms and literature have also improved, and initiatives like teleinterviews – completing the application over the phone with the provider – makes sure we get the right information.

We put our claims stats in the hands of advisers, so that when they recommend one of our IP plans they can give the customer concrete facts about us. It is about accountability. We say we are going to do something – pay claims. Then we tell people whether we have been doing what we said we would. And where we cannot pay a claim we explain the reasons why.

Over time, we have heard various arguments as to why insurers do not publish their stats. The most common is from smaller or newer companies that feel their book of clients is too small and their stats will therefore look too volatile, which is a fair point. But really, is it not just as easy to bite the bullet and explain this alongside the stats?