Jenée Tibshraeny has this excellent piece on the sales of insurance and the willingness of insurers to release claims data. If you are an adviser and easily offended by anyone talking about buying insurance direct then this might not be for you. But that would be a shame, because there is actually a lot of interesting data and quotes from insurers in the piece about claims rates overall and TPD claims in particular.
The whole interest in the piece has arisen because of the ASIC investigation into claims rates. That was a really useful piece of work. Although some in the Australian media are trying to portray it as more evidence of bad practice among insurers, it is actually a really positive report for the industry. The industry pays lots of claims - typically in 90+% range and upwards. The report also showed the value that Financial Advisers add: clients of advisers got more claims paid than non-advised customers. There was only one blemish, really, and that was TPD.
TPD has a bad reputation in Australia and New Zealand, but for widely divergent reasons. In Australia insurers don't like it much because the market has become highly litigious and almost everyone who is in work has TPD as a part of their superannuation scheme. So the cover is much more widely held and claimed on than in New Zealand. Here TPD is rarely bought and rarely claimed on. How rarely, we have no idea.
Regular readers will know that I am an advocate for more data. I love data and I think it helps make better decisions. I also think that advisers and customers are not quite the fools they are assumed to be by some commentators: they can use data responsibly. Some won't, of course, but they are probably making all the mistakes they will make right now.
But reluctantly I have to agree that NZ insurers are probably right to be cautious about releasing TPD data. There was a big change in TPD products about five years ago: the addition of 'partial' benefits in TPD. These arose because of negative media reaction when claimants suffered very substantial, and permanent, but not total disabilities, like losing a leg, for example. Mixing up the data from the older contracts with the new is a major risk. So is acting on your own if none of your competitors are going to share their data. This is an area where the action of an industry body or regulator can help a lot. Naomi Ballantyne is quoted as saying that she supports the idea of developing standards for the release of claim data in a recent goodreturns article, but recognises that there are technical challenges. Another challenge is this: if TPD does have a problem, with low claims rates, say, it will never be overcome by keeping it all a secret. It will only be overcome by making better products and being open about the value they deliver.
In the UK, the Association of British Insurers has had success in boosting market confidence in products through claims reporting. For them it wasn't about boosting direct over advice, it was about boosting all forms of sales through improved consumer confidence. That looks like a good goal to me.