Insurance is rarely a subject of discussion at the local pub. When it is, I suspect that the conversation will focus on either how much you paid or whether your insurer did or did not pay your claim.
Regardless of the type of insurance – household, travel, payment protection and even health and life cover – most consumers look at the cost first, and not the quality of the policy itself. It is also true that once most people get their policy document, it goes straight in the drawer or filing cabinet. It is only likely to see the light of day when it comes to renewal time or when the policyholder needs to make a claim.
An insurance policy is worth nothing until you need to make a claim. At that point, however, it can be worth its weight in gold. Insurers covered more than £3bn worth of damage caused by the devastating floods of summer 2007. And while payment protection insurance (PPI) has attracted a lot of negative attention of late, I wonder how many homeowners are thanking their lucky stars now that they did have cover on their mortgage, given the volume of unemployment claims that insurers have experienced over the past couple of years.
While the conversation at the pub might grumble on about insurers never paying out, the fact is that the UK insurance industry paid out £57m per day in 2008 in general insurance claims, according to figures released by the Association of British Insurers. This includes £9m to householders for property damage or the loss of possessions. Between 1998 and 2008, general insurance claims paid increased by 41% from £15.6bn to £22bn. So if the insurance industry is not as Scrooge-like as consumers would believe, why are they so cynical?
Complaints about insurance accounted for 39.5% of all new cases raised by consumers with the Financial Ombudsman Service (FOS) last year – but less than half of those related to claims.
While the volume of complaints received by the FOS relating to PPI tripled in 2009, the vast majority continued to involve disputes about the sale of the policy rather than disputes about the rejection of claims made. At the same time, the number of complaints about buildings and contents insurance rose by 27%. The FOS view is that cost-cutting and redundancies in the insurance sector, together with increased financial uncertainty amongst consumers, can lead to disputes being fought more tenaciously on both sides.
So what can intermediaries do to help their clients through the claims maze and ensure they have a positive experience with the right outcome? After all, if you can help your client experience the maximum value of their insurance policy when they need it most, they are more likely to come back to you when it comes to renewal.
I would like to be able to divulge industry secrets and give you some top tips to make sure that your clients’ claims are always paid – but, quite simply, there is only really one and it is not that much of a secret: the route to making sure that your client is likely to get the right outcome at the point of claim is to make sure that they purchase the right cover in the first place.
Buying insurance is a complex transaction and an insurance policy is essentially a contract between the insurer and the insured. While there are responsibilities on both sides as part of the contractual process, I don’t believe that consumers truly understand the level of responsibility and nor do I believe that they really think they have any.
Intermediaries can prove their worth through the advice and guidance they can provide during the purchase process. You want to be confident that you are recommending cover that will be of real benefit, and the last thing you want to happen is for your client to purchase a policy and subsequently make a claim, only to find that their loss falls within one of the policy’s exclusions. This is particularly true when it comes to the sale of protection policies such as mortgage payment protection insurance (MPPI).
It is vitally important to discuss MPPI cover fully at the point of sale to ensure that not only are your clients eligible for the policy, but also that they have been given – and understand – all the material information they require to make an informed decision about the suitability of the cover and whether it meets their individual circumstances. If your clients don’t understand the exclusions and limits when they buy the policy, then there is a risk that they could make an invalid claim and be both disappointed and disillusioned with insurers.
To illustrate the point, let me highlight the main reasons why MPPI claims are denied.
One of the main reasons is because the claim occurs within the exclusion period of the policy. This is the time from the start date of cover during which they cannot make a claim, for example 30 days for accident and sickness or 90 days for unemployment. The policyholder cannot make a claim for an event that occurs or which they become aware of within that period. Clearly no-one can predict what will happen in the future, but it is essential that you make your customers aware of the exclusion period that applies so that they fully understand whether they can make a claim or not should the worst happen.
Another common problem is that someone who is self-employed has purchased an MPPI policy covering accident, sickness and unemployment. The only way they will ever be able to claim against the unemployment element of the cover is if they enter involuntary bankruptcy. Quite simply, no-one who is self-employed should ever be sold unemployment cover so do ensure you fully understand your client’s employment status so you can be certain you sell them the right level of cover and they do not buy a policy that they will not be able to claim against.
Last but by no means least, a good percentage of claims are declined because the policyholder was aware of a medical condition before they took out the policy but failed to disclose the information to the intermediary or insurer. I cannot stress enough the importance of making your clients aware of the need to make known any condition – whether diagnosed or not – which they knew about, or in the insurer’s reasonable opinion, should have known about, or for which they received treatment prior to the start date of their policy.
Taking the time to identify your clients’ needs, making sure they understand what level of cover is appropriate to meet them and what an insurance policy will and won’t cover can avoid an awful lot of heartache further down the line. In my opinion, guiding your clients successfully through the claims maze begins right at the start of your conversation with them, not at the crunch point when it might be too late anyway.
Nigel Payne is managing director at Assurant Intermediary
