Mick James, a consultant who has worked at Standard Life and RGA, gives us his thoughts on the importance of claims stats.
The business of life insurance is the business of promises and trust. We take a customer’s money and they have to believe that if something terrible happens to them, we will behave fairly and honourably and will pay their claim. They have to trust us.
For our part we have to trust the customer has given us all the information we have asked for and has truthfully answered all of our questions. When these elements are in balance, we have a healthy, working business process.
Who trusts insurers? I certainly have a healthy scepticism. Following a flood from my upstairs neighbour I recently claimed on my home insurance policy and, while submitting the claim, I worried the insurer would try and ‘weasel’ out of the payment. I had tried to answer all their questions truthfully but had not read the policy provisions, nor all of the supporting documentation, preferring to trust that a house insurance policy would ‘do what it said on the tin’. It was, in fact, a remarkably smooth and professional process and my claim was settled, but, and here’s the point, at the outset I didn’t trust this would be the case. My default position was that the insurer would seek any means to refuse or reduce the claim, I simply had no reason to believe otherwise.
We are all customers and if you honestly look into yourself, I bet you will feel similar pangs of doubt. This is also what our customers feel.
If you walk in a customer’s shoes what would make you feel more trusting? Transparent information about the number of claims paid; clear examples showing why claims have not been paid; a claims promise; you decide?
Back in the bad old naughties we were accused of ‘fishing’ for declines, reject a cancer claim because you didn’t disclose a tingling sensation you discussed with your doctor three years ago. At one insurer I fell out with my chief underwriter over this, we had a 75% payment rate for CI claims and for the life of me, I could not see why anyone would buy my product when the chance of a successful claim was so low. Kevin Carr, then at Lifesearch, led the debate to publish the first statistics and I took little persuasion. I told my Marketing Director what I wanted to do and he replied: “This will be a great story. If it works you can keep your job, if it backfires don’t bother to come back”. We were the first Life Office to publish our claims statistics and it remains the most meaningful thing I achieved in my career.
Many years later CI payment rates are significantly higher and we are no longer vilified, weekly, in the press. Do customers trust us though? No, of course, they don’t, but they have a stronger belief and the nagging doubts are buried a bit deeper below the surface.
I was speaking with a Life Office in April who told me their IP claims statistics. Figures not too dissimilar to CI in the naughties. To build up sales in this area you need to build up trust, to build up trust you must be transparent. You’ll be surprised where this leads you. For CI it changed definitions and claims philosophies. For IP to work we must have a product and a process which creates an outcome where claims are successful in well over 90% of cases, anything less is a failure. Don’t hide behind the statistics, embrace them, use the failed claims to educate your thinking and use them to drive your process and product to a better place.
If we fail to honestly publish claims statistics we immediately fail our customers, after all, what is it we are seeking to hide, and why on earth would we want to do that?