Full disclosure
Lucy Quinton:To kick off the questions today, I thought wecould start by looking at the main problemsurrounding the issue of claims.
Jennifer Gilchrist:The main problem that we have right now isnegative press and TV stories that are not reallyhelping anyone.
Julie Hopkins:The statistic that fascinates me is that, betweenthe year 2000 and 2005, the industry paid£2bn worth of critical illness (CI) claims. Andthat is never mentioned in any articles. But it isa few aberrant claims that get covered. It is nonlinkednon-disclosure that is the issue mostpeople cannot grasp.
Christine Gallagher:Yes, I think you are right. The problem casesthat we have coming up are the non-linked nondisclosure.And that is something that weas an industry need to be looking at.
Fay Goddard:But you have to address the whole issue of nondisclosurefi rst. If we take things like travelinsurance, building and contents, I am surethe stats would be equally poor, but you haveto remember that this is a far, far moreemotive subject.
Debbie Akers:One of the important things to look at is howdifficult it is for the customers to fi ll out theapplication form. It is also key to get inside theminds of the people who design the form andknow what they are looking for. And I think thatis what is getting increasingly diffi cult. You haveto look at the processes and the capability ofpeople. Even people who are basically honestcan forget, or cannot understand. Not everybodyknows that pins and needles is a neurologicalsymptom, for example. So we have to see it fromthe customer’s point of view.
Lucy Quinton:So, who should take responsibility for this?Should it just be the customer or do you thinkit should be the industry as a whole?
Debbie Akers:I think the responsibility should be shared allthe way along the chain. We have to make surewe hold the mirror up so we can see how thecustomer sees us. And what would be reasonablefor them to understand and disclose. And thenprice and design the products around that.
Karin Lloyd:Do you think that doesn’t happen at the moment?
Debbie Akers:There are probably some areas where it is a lotstronger than others. But it is complex for peopleto understand. Some advisers are experts inprotection and really understand a lot aboutunderwriting. Some really don’t.
Julie Hopkins:The other thing that is quite important is thatwe cannot benchmark what we do now againstwhat we used to do in the past. And there aren’treally that many people who have such anintegrated overview that they know whichquestions are the ones causing the problems. Itwould be helpful if we could map non-disclosureissues against particular questions and try torevitalise those questions in a way that mayminimise that.
Lucy Quinton:What do you think of the Law Commission’sproposal?
Debbie Akers:It doesn’t go far enough.
Julie Hopkins:The main issue is CI and the proposal is onlyfocusing on life cover. Not many claims areturned down for life compared to CI, so it is notgoing to achieve what we need to achieve.
Lucy Quinton:So what is the answer then?
Julie Hopkins:I think it is down to positive public press.Unfortunately, a negative story makes morepress and sells more papers than a positive one.
Fay Goddard:We need to look at the confi dence issue and evenif you don’t have a precise feel for the number ofclaims that are rejected, we know it is beingfocused on as being an issue. So, therefore, youneed to take it one step further and look at whatis the main cause of a claim being declined andfrom my understanding over half are turneddown because of non-disclosure issues. So Idon’t think it is a problem of the claims beingdeclined, it is the non-disclosure that you haveto get to grips with because that is the cause ofthe problem. And then secondly, ‘not meetingthe defi nitions’ is perhaps the second biggestrejecter. One thing that can skew the fi gures iseverybody trying to claim on things, evenjust having a punt at it, whether they think itmay or may not be covered. I think too muchfocus and reliance on stats without getting tothe underlying cause is the wrong angle. Weneed to examine why things are being declinedin high proportion and then look closely atthe areas of non-disclosure. Is it the design ofthe forms? People will forget, and there willbe a lot of innocent non-disclosure. At somepoint in time, it may mean that we need totake it a step further and say “look, wecannot expect people in their 40s and 50s toanswer something like ‘have you ever sufferedfrom….?’” So we may need a higher standardof underwriting.
Debbie Akers:I think it will be interesting to see how muchthe various forms of tele-underwriting andtele-interviewing can infl uence the number ofdeclined claims. Because that is relatively new soit can begin to have some infl uence on claims.There is a skill in helping people to rememberand helping them to understand the questions ina very objective way. Over time, we will be ableto track whether that business has a much betterclaims paid ratio than the others.
Karin Lloyd:There is a tension between getting the caseissued quickly and the amount of underwritingthat we can do and getting that balance right.What everybody seems to be saying at themoment is that we have the balance wrong. Ithink a lot of companies think of their customersas the IFAs and not the end consumer and theydon’t take their thoughts into account.
Emma Thompson:As an intermediary we ask insurers whetherthey could test new products and literature withconsumers to see what their understanding is.
Jennifer Gilchrist:It should be built into new product development.
Lucy Quinton:Do you think the Law Commission’s proposalwill come into effect?
Jennifer Gilchrist:Although it has focused everybody’s mind, Idon’t think that the proposal is necessarilysomething that will force us to do something. Ithink people are doing things now for nondisclosureto help the situation and things willmove on from there.
Johanna Gornitzki:Don’t most providers use a fi ve-year cut-off pointfor life claims anyway? So will it actually changethings that much?
Julie Hopkins:I think there is a difference in the way thatpeople handle claims that have a longerduration. But that does not mean that thereis an automatic yardstick for life cover whereclaims are looked at in a different way inrespect of evidence that is gained in the lightof a claim. But if it looks odd, companies maystill do something.
Karin Lloyd:Going back to your question, it won’t help if theLaw Commission’s proposal only covers lifeinsurance. It is immediately open to criticismfrom that point of view. And it is not going totake much of a journalist to work out that mostof the problems with declined claims are comingfrom CI and the solution does not address it.
Julie Smith:Obviously, there is an added complexity foraccelerated CI. Like how do you separatethe two? So that is going to be a contentiousissue there.
Emma Thompson:The other thing is that there is loads of focuson CI and client claims for CI, but there isnot really much talk about income protection(IP). I think what we need is some moreIP claims stats out there as well so it canbe assessed.
Julie Hopkins:Your understanding is absolutely spot on. Infact, more IP claims by percentage do end upwith the Ombudsman than CI claims. Andmore end up with having a fi nal adjudicationby an Ombudsman, in other words, the fi rstdecision is not accepted. But the bulk of thoseare in respect of occupational issues, and notto do with non-disclosure.
Lucy Quinton:Do you think it is a good thing for theindustry to publish declined claimsstatistics or has it further damaged theindustry’s reputation?
Emma Thompson:I think it is good that individual insurerspublish their declined claims stats, but Idon’t think you can use them as a meansof comparison.
Julie Smith:It is diffi cult to compare them because companiesrepresent their information in so manydifferent ways.
Julie Hopkins:You need a standard formula that all providerscould use.
Fay Goddard:As much information in the public domainas possible is good. You cannot expect people tohave confi dence in the industry if you coverup anything.
Lucy Quinton:What product areas are seeing most problemswith declined claims?
Christine Gallagher:It is CI because the sales of CI way outsell IP.
Fay Goddard:Certainly on the complaints side it is the nonadvisedsales that are often sold as an ancillaryproduct on the back of a mortgage. That seems tobe the biggest problem area from the Ombudsman’sperspective. People have allegedly beentalked through a non-advised sale but have feltthat they received advice and consider that theyhave given adequate information to whoever istaking their details down. And then you start thedisputes over who said what. If you have anintermediary or an IFA involved, they areresponsible for the advice and it is absolutelyclear where that responsibility lies. I think wehave some very muddy waters between advisedand non-advised sales and we need much betterclarity over where the responsibility for thepurchase of a product lies in a non-advised sale.
Jennifer Gilchrist:People don’t necessarily recognise individualissues but they recognise bad publicity. Andeverybody is tarred with the same brush.
Lucy Quinton:So what can be done to change that?
Julie Smith:There needs to be more education for consumers,so they understand what, for example, CI is.Some people think that because they are ill thatthey will get a payout but actually it is a chronicdisease. They think that it should be paid outwhether the likelihood of them living is quitehigh or not.
Lucy Quinton:So who should take responsible for this?
Julie Smith:It should be an amalgamation of IFAs, providersand press. I think it needs to be positive spin inthe press, IFAs talking to their clients andmaking them understand what they are beingcovered for or what areas of cover they do need.
Jennifer Gilchrist:I think the new Statement of Best Practice for CIhas made a bit of a difference for clarity aroundthe defi nition, but it is only since April that thishas come out so it is too early yet to see if this isgoing to have a wider effect.
Julie Hopkins:I think the diffi culties around total permanentdisability (TPD) is a standing issue.
Eileen Mann:Insurers are doing a good job now under the newdefi nitions by giving some examples of whatwon’t be covered.
Debbie Akers:I think the consumer guides that are used arethere to explain. The aim is to make themintelligible to consumers, and especially if theyhave an adviser to help them. The intermediary’sjob is to help them with the application, it iscrucial that it is a good application and that theintermediary goes through and explains thedefi nitions to them.
Jennifer Gilchrist:There is further work going on to tryand clarify defi nitions for consumers so thatit is managing expectations and all this isgood and will help the industry as a whole.Going back to TPD, I think it can take upto 12 months or more than that to make aclaim. And, although there is a mention ofit in the documents now and we have startedwork that came out through the Statement ofBest Practice, we still don’t know if thatmessage is getting across – because TPDdoes feature quite highly in a number ofdeclined claims.
Julie Hopkins:As a percentage of claims, it is reasonably small– probably around 5% or 6% – but half of thoseare turned down.
Fay Goddard:Tele-underwriting has to be a better way thanrelying on recall, particularly if we are gettingsomething like 60% or 70% going throughwithout anything other than clients’ memories.
Debbie Akers:There are two advantages of the telephoneprocess, one is you have a dialogue withan appropriate and skilled person in thefi rst place, and someone who knows what weare looking for. So that helps to encouragegood disclosure. And then if you do get adispute, if you can review the recording,then you have proof of what was said so ithas benefi t both at the beginning and if itgets that far, at the end as well. And, for somecompanies, it is going to help them to understandtheir customers because it is providing awhole point of communication that they havenot had before.
Emma Thompson:Do you have any stats to make a comparisonbetween joint life applications and single life?I was wondering whether there is a higherproportion of non-disclosure on joint because ofpartners hiding things from each other ratherthan on individual single life ones.
Julie Hopkins:I am not aware of any statistics. Joint life is oneof the issues that the Law Commission is keen tounravel, because the non-disclosure on the onelife penalises the other. And, clearly that wouldnot have happened if they had taken out separatepolicies.
Debbie Akers:The confi rmation schedule process as wecall it where each life assured gets theirown copy separately is very useful. It stillwon’t solve everything because if there wasan embarrassment factor in the non-disclosure,then probably, one or both of them may thendisclose. But if it is going to change the termsof the policy then they will still have toexplain why. But in general terms, theconfi rmation schedule is a great opportunityfor people to double check their term and in thecomfort of their own home.
Jennifer Gilchrist:I agree with you Debbie, and I would say thatit has been very interesting because thenumber of schedules that come back withadditional information shows that peopleare reading these confi rmation schedules.And paying attention.
Emma Thompson:We are really worried about the whole liabilityissue in terms of where we are placed if thereis a declined claim, which is why we now recordour calls and have done for a year now.
Debbie Akers:The electronic systems and expert underwritingsystems give you a greater opportunity totailor your questions to a particular groupof individuals. So that young lives maybewouldn’t be asked so many questions asolder lives.
Lucy Quinton:Non-disclosure is an issue that most peoplesimply dance around. But nothing ever trulyconcrete seems to come out of the industry. Sowho would you say is actually responsible forrectifying the issues we have covered here?
Julie Smith:It is the consumer’s responsibility to disclosebut we cannot escape the fact that people willalways fail to remember or misunderstandbecause of the technical nature of a lot of thedefi nitions and the extent of the actual cover.So I do think it has to be better underwritingand more underwriting.
Debbie Akers:It is quite diffi cult to start making that change ina market that is driven so much by price.
Julie Smith:If you go onto the Exchange website or somethinglike that, to some degree you go on costbecause the clients say ‘well this is how much Ican afford’. But why is there so much focus onhaving to be on top of the table, why are there somany changes? That only adds to the confusion.I get so many emails coming through about pricechanges that I don’t even look any more becausewhat is the point? I know cost is a factor, but it isthe actual product that is the focus.
Karin Lloyd:I think there are two sides to it, there is howdo you reduce the rates of non-disclosure upfront but then there is what do you do whenyou fi nd it?
Lucy Quinton:Do you think that the problem of non-disclosurewill ever truly be rectified?
Fay Goddard:It can be improved, but you are never goingto rectify it completely. Because there willalways be deliberate non-disclosure and therewill always be inadvertent and that is a fact oflife in any insurance.
Julie Smith:I think when tele-underwriting becomes moreof a common practice. Once everyone is doingit and it is a bit more common practice we willsee a difference, more IFAs will use it and theywill have more confi dence in it, and hopefullythings will improve.
Debbie Akers:I think one of the frustrations at the moment iseverything that we do to improve disclosure atthe front end is going to take quite some time tocome through in improved claims statistics. So,in the meantime, we have to make sure that weget the best publicity that we deserve on claims.So you have to be patient.
Lucy Quinton:What do you think the future holds forthese issues?
Fay Goddard:I think we will see a change in much betterunderwriting, more underwriting, differentsystems and automated systems. I think you arejust going to see a different process and we arenot going to rely as heavily on people’s memoryrecall or honesty. There has to be more done atpoint of sale.
Debbie Akers:If you think further ahead, if we had immediateauthorised access, automatically, to electronicpatient records, then obviously that is ahuge thing to work out how that could workin an acceptable way to society. We would haveinstant information that could tell us that. It isstill some way off in terms of comprehensiverecords and the ability to communicate, theability to interpret the information and inparticular the security and confi dentialityand acceptance to the public. But it is a veryinteresting line that, work has been donealready on the electronic GP reports, which Ithink, to some extent, was ahead of its time.But there is still some way to go as the NHSparticularly and primary care improves theelectronic nature of records, it is an opportunity.But it is a long project ahead.
Julie Hopkins:We have seen a demonstration of that at theAssociation of British Insurers, of consumershaving access to their full records. And indeedthat would be valuable.
Emma Thompson:Just last week, we had a client that sent in athick pile of medical records. And she sentthem in with the application because shewas so concerned about the whole nondisclosure.That showed how worried shewas about non-disclosing.
