Consumers’ perceptions of what would happen if they needed to make a claim on their life insurance are far more negative than the actual experience, according to new research.
The Association of Financial Advisers (AFA), in conjunction with The Beddoes Institute and BT Financial Group, has produced a new White Paper called the ‘Value of Protection’, which compared the perceptions of the claims process with actual claimants’ experiences. It found there was a significant gap between what insured clients believed they would need to do to make a claim, and the support they would receive while on claim, versus the actual experience of recent claimants.
The Beddoes Institute interviewed ten consumers with income protection insurance, which had been purchased both direct from the insurer and through an adviser. All of the consumers said they believed the claims process would be difficult, drawn-out and adversarial.
Specifically, the research found that consumers believed:
- They would need to see multiple doctors in order to complete their assessment, including the insurer’s own medical specialists
- The insurer would approach the claim with a suspicious attitude and would lack compassion
- It could take several months for the claim to be approved
- Once the claim was approved, insurers would ‘check in’ regularly to get proof that the claim was still legitimate
- If the insurer provided rehabilitation services the primary driver behind this would be to minimise the claim duration
“Clients thought that when it first happened it would be very difficult and they’d be pretty overwhelmed,” said Dr Rebecca Sheils, who carried out the interviews with the consumers. “That said, they expected the insurer to make it even more difficult for them, during an already tough time.”
Beddoes then asked three people who had recently been through an income protection claim of their own about their experience. In contrast to the non-claimants, the claimants said the actual experience was vastly different and far more positive than they expected.
The claimants were asked to list the best part of the claims process, coming up with four consistent areas:
- Holistic support with recovery
- Empathy, sensitivity and client focus
- Having a dedicated case manager and the continuity of staff
- Ease of the claims process
The AFA’s Brad Fox said the results of the research had very clear implications for the insurance industry and the way it positions itself in the consumer market.
While the gap in the perception and the reality of claiming is so far apart, we’re going to continue to have a significant underinsurance problem
“Getting someone to buy insurance is actually about a promise. And yet, we haven’t really measured how people are reacting when the promise is delivered. It’s a significant gap. And whilst we know underinsurance is so high, perhaps if we did a better job of getting the evidence and sharing the evidence the right way in the market, perhaps the impression around insurance will change.
“While the gap in the perception and the reality of claiming is so far apart, we’re going to continue to have a significant underinsurance problem. So our first step is to build the evidence pool to help us communicate out.
“It’s not just about insurance – the value of advice more generally is misunderstood. On claims, it stands out completely from this research – you could drive a car through the gap. And we need to fix that.”
The White Paper provides a seven stage best-practice claims framework for insurers, which Beddoes says can be used to benchmark current performance and to inform future practices. The AFA and BT’s Head of Life Insurance, Phil Hay, will be presenting on the findings and implications at this year’s AFA roadshows. Click here for more information about these events.
To learn more about consumers’ expectations of advisers during the claims process, see: Advisers Challenged to Re-Frame Their Claims Services.
Interesting article, I must say from my experience its far from the truth.
I have been a risk adviser for 30 years this year, I have worked with the best in the industry such as David Calder, Mark Thompson, Michelle Gill, Karen Janes, Phil Anderson, Craig Dunn, Valeska Farrow, Mark Masotti, Jane Evans etc just to name a few.
I have a claim that the Insurance company decline to asses because the claimant who purchased a guaranteed endorsed IP refuses to supply financial evidence.
The client refuses to sign giving the insurance company to access to records all government records all medical records etc.
The application included full medical and financial disclosure at the time of application and was accepted by the underwriter.
The policy has been in force for a period of 12 years a professional occupation and simply the claimant will not budge nor will the insurance company.
Guaranteed endorsed means just that the financial evidence has been supplied at the time of underwriting and accepted.
The insurance company argues that is not the case, the insurance company says that they are not interest in non disclosure or a false claim but they want full access to all records I ask why?
The policy has 1 day accident and guaranteed upgrade the insurance company argues that guaranteed upgrade is not applicable why I ask they say that the new policy that replaced the old policy does not include the better benefits of the old policy.
The insurance company says in its definition to be eligible for a claim you must prove a 20% reduction in turnover, OR unable to perform your usual duties of your occupation OR unable to work more than 10 hours a week.
The insurance company argues you must meet all 3 to qualify for a claim why?
Its not a partial claim the claim is an injury to the hand that requires surgery, the client has 1 day accident option, booster option, rehabilitation option and so on.
Its one year latter and still no resolution. So much for a 1 day option.
The company argues also that whilst the applicant was a insurance broker at the time and now on his occupation is a consultant in the same industry his occupation has changed and therefore is an issue of non disclosure to the insurance company.
The insurance company wants forensic accounting to look at the current financial evidence, why? it did in 2004, this practice has a residual income and even if the income goes up the insurer is very well aware that could be the case. And very more likely than not.
The income is paid to a trust and distributed at the discretion of the discretionary trust and the trustee.
As an adviser I have sold this product for many years it has always been marketed that this (one of only a few products) once it endorses financials they are no longer required at the time of claim as its a guaranteed endorsed product.
I was shocked and I am still shocked that the insurance company argues that endorsed guaranteed is not endorsed guaranteed, that in its PDS it say if your policy is endorsed guaranteed than you will not need to provide financial evidence at the time of claim.
That on its web site it say that in the event of a claim under guaranteed endorsed al you need to provide is a Dr certificate.
This has all been supplied so the insurance company who has an MRI, CAT SCANS XRAYS etc, with a specialist report saying that corrective surgery is required wants more proof of a claim.
So the insurance company cant claim non disclosure, fraud since its in the xrays and scans its hard to say its a claim of fraud, the financial and medical evidence was supplied at the time of application how can the insurer say no?
I in my entire life have never seen anything like this now the claimant is on PROZAC so much for in good faith.
Disappointing for you, Matthew. We’ve just paid out a claim against a trauma policy for upwards of a quarter of a million on an event which occurred in 2010.
The client didn’t even notify us feeling it was too minor to claim against. However only six weeks ago we talked about it and we urged the client to make a claim. The client did, and the result is above. That can’t be faulted.
But in your case have you exhausted all avenues, including the AFA if you’re a member? The insurer, if wrongfully absolving themselves of responsibility in your case, should really be named so that other advisers consider this before recommending the insurer. Still, that’s likely only to lead to litigation and the only winners in that scenario will be the lawyers. Whatever happened to natural justice?
Am I correct in my understanding that the people interviewed for this study were in fact ONLY those who were successful with their claims? Did this study also interview people who were Unsuccessful with their claims – and if so, what were their responses, and also what may have been some of the reasons they were unsuccessful?
Interviewing 10 people with Income Protection seems a very small sample for research.
What on earth would anyone expect from any sort of consumer claims survey (small sample or otherwise) apart from misconceptions, when the industry does NOTHING to promote ourselves and our real day-to-day outcomes to the overall population? We don’t tell claims stories out loud except to ourselves, we don’t publish the billions of dollars that are paid out, we don’t even communicate the value of insurance, as a cohesive industry message.
These constant surveys on which lots of money is spent keep telling us what we already know. It’s high time we stopped gazing at navels and started engaging the public properly. Come on FSC members get your collective act together.
In terms of the survey method and sample size, we deliberately chose a qualitative approach to the research because it was the first industry deep-dive into consumer perceptions regarding the claims perceptions and experience.
In this type of research, the number of interviews is determined by the consistency of the themes that emerge. You reach a point of ‘diminishing returns’ where very little or no new information emerges after a certain number of interviews.
The surprising thing about this study was the consistency of the themes that emerged very early on across all consumers. We very quickly reached the point where very little new information was coming out and therefore capped the consumer perceptions interviews at 10.
In terms of the claims experience case studies, these individuals were selected as they represented the positive outcomes that can happen when a claim is managed well by the insurer and when the claimant receives holistic support with their recovery. They are not meant to be representative of all claims experiences – just examples of what can happen with the right approach.
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