Claims – quantifying an approach

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I hear all the time amongst insurance people that insurance is about paying claims. I hear brokers talk about it, and I hear clients doubt it. I hear company managers talk all the time about the claims they pay - but we talk less often about the claims we don't pay.

Wednesday, March 2nd 2011, 5:41PM 1 Comment

by Russell Hutchinson

According to recent research into confidence in financial services companies the public believe that we pay fewer claims than we actually do.

The chilling fact is that apart from the aggregate stats on what claims are paid, issued by each company, there is very little hard data about claims. We lack reporting as a percentage of premium, which could be calculated - but even that wouldn't reach the heart of the matter as far as consumers are concerned. They want to know something much harder: they want to know whether what they think will get paid will actually get paid. This concept is much harder to satisfy. Advisers try to do so. 

Advisers are in business usually in small companies - as a consequence they can only, over a long period of time, form a view about the claims paying approach of a company over a long period of time. Whatever knowledge they build up can be overturned in an instant with a change of staff in the claims team.

That's the problem. To the extent that the inherent limitation in this knowledge can be overcome in aggregate, it is tried. Put simply, if the incomplete opinion of an adviser is added to the incomplete opinions of many, many, advisers then does it become more reliable? Perhaps, so here we have the claims paying ratings available from Beaton research. But even these are little used.

I think there is something missing. A survey of people who have had claims paid by life and disability insurers to examine claims performance, repeated over a long time series, would provide a vital missing benchmark for advisers and clients alike. We should have one. Next time someone from a life office asks you what they should do, please do us all a favour and ask for a good claims survey.

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