Quotemonster High Users
ASIC Claims Review: Quantifying the Value of Advice in Extra Claims Paid

Sue Laing Writes to ASIC on the Danger of Releasing Claim Acceptance Rates

In this piece at RiskInfo.com.au Sue Laing is quoted as highlighting the dangers of publishing claim acceptance rates. Here are some examples of her concerns: 

The underlying reason for Laing’s concern is that a ‘leader-board’ of decline rates will create competition between insurers to avoid rejecting claims in order to achieve a higher placing. She believes this is a dangerous precedent that would lead to an unsustainable pricing structure that could only be addressed by price hikes.

It is possible for such data to be misinterpreted. ASIC's report was balanced and positive for the industry, only noting some concerns with some types of direct insurance and the high variability in TPD payment rates, but the media has held it out as something far worse in some coverage in Australia.

But we felt that, on the other hand, the research raised some really valuable issues for advisers: it highlighted that claims are much more likely to be paid from insurance arranged by an adviser. That may have something to do with the difference between underwritten and non-underwritten products - a problem we probably have here. That's a valuable insight which consumers would not have from a trusted third-party if ASIC had not done this research.

Laing proceeds to list problems with the data as issues as well: 

She also questions whether the industry even has the capacity to report consistent claims information, saying claims data reported by insurers is “…ridiculously inconsistent.” Laing adds, “Even claims causes, which most of the life insurance world globally reports based on an international code but our industry doesn’t, are impossible to properly collate. The risk store has experienced that first hand for 10 years as we have struggled to gather and publish annual industry claims paid and causes statistics to the best quality we can muster from what we are given.”

Laing has a point, but I think secrecy is the wrong answer.

I know the claims data is poor. Plenty of evidence supports scepticism about the numbers. Take the calls to Sovereign after the Christchurch earthquakes for example, they were just confused customers, not real claims. But what about someone who thinks they have IP and only have TPD, is that a claim? Probably not. Now what about someone who thinks they might qualify for a partial payment under their TPD but just misses out? Probably is a claim. And so on. But the answer to this complexity isn't to allow claim payment rates to remain in the shadows. The answer is to work towards industry standards of record-keeping and reporting.

When Laing points out that most of the life insurance world globally reports based on an international code, but Australia doesn't... the first question in my mind is: why not? There may be a good answer, but claims rates look like exactly the kind of data we should be working on.

Finally, I think that focusing on one measure alone is always a bad idea: just price, just product quality scores, or just financial stability, or just claims data, or even just customer service scores. People need to take a look at the lot and make a call. Some won't want to - too hard! - they will be better off using a professional adviser. Others will be happy to rate trade-offs and consider options just like they do with other complex financial purchases with multi-year downstream effects (like buying a house). 

 

 

 

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.