"It won't happen to me." This is one of the key reasons why people do not take out protection, and why life cover, critical illness and income protection products are sold rather than bought.
Even those who are convinced of the financial peace of mind that such a product can bring, rarely think that they will actually have to make a claim. The real value of the product is only highlighted when 'it' does happen and they come to make a claim.
The claim will take place at what is undoubtedly an emotional and stressful time for the policyholder and it is essential that the claims process is speedy, efficient and above all, causes as little inconvenience as possible for the claimant and their family. Indeed, the vast majority of protection claims are met without any problem, but the industry still suffers from a reputation of denying claims and hiding behind the small print.
But companies focusing on protection want to pay claims. Prompt payment of legitimate claims will increase consumer confidence and lead to more sales of what are important benefits. The definitions are not there to provide the insurer with an escape hatch, they are there simply to provide a measure as to whether the illness, disability or condition has actually happened. The bottom line is that if the policyholder has the illness, disability or condition, for which they are claiming, and there is clear medical evidence to support that diagnosis, then they will get their money.
It is inevitable that claims will sometimes be turned down, but the two main reasons have nothing to do with companies hiding behind definitions. The first occurs when the claimant does not actually have the condition they are claiming under.
For example, on critical illness policies, chest pain caused by angina might be distressing and it might also be an early warning of a possible heart attack some time in the future - but it is not a heart attack and therefore would not be a valid claim.
Similarly, someone with a badly broken wrist would not be a valid total permanent disability claim. The condition is neither total nor is it permanent, but there have been examples where policyholders have claimed for such minor injuries. These examples indicate the need to manage the expectations of people who take out protection products. This is something that IFAs can do as part of the advice process.
Non-disclosure
The second significant reason why claims are turned down is non-disclosure. If someone applies for a protection product knowing that they are ill or suspecting that they are sick, then they are breaking their duty to inform the insurance company of material facts which could be used in the underwriting of the risk. Failure to disclose these facts can invalidate claims.
Such non-disclosure is a major problem. It increases the costs of administering policies and as all these cases would be recorded as declined claims it perpetuates the myth that providers actively seek to avoid paying claims. And the greater the proportion of claims that are turned down, the less confidence IFAs and their clients will have in protection products.
This again is where an IFA's advice is essential in ensuring that the customer writes down all material facts when they apply. Application forms always highlight the importance answering all the questions truthfully, stressing that if the applicant should disclose everything - whether they think it is relevant or not. The customer may need help deciding what is relevant information or they may forget small but important facts about their medical history.
Speeding up the process
So what happens during a claim and how can IFAs, their clients and providers help speed up the process? If a policyholder feels that they have a condition that they can claim under, the first thing they should do is check their policy document and their understanding of the cover they have.
Again, with their IFA's advice, they can avoid making claims which are clearly not valid in the first place - such as the aforementioned broken limb TPD claim. Most companies now have customer helplines that will guide policyholders through the claims process.
It is best to inform the insurer of the claim, or potential claim, as soon as possible. The next step is to obtain the company's claim form and carefully read the questions. Ensuring that all the information requested is actually submitted will make the processing of the claim much easier for the assessor and there should be no unnecessary hold ups.
The questions on claim forms are designed to get the necessary information from the policyholder, who should be as thorough as possible in supplying information about their condition, including full diagnosis, names and quantities of any medication. Giving the names and addresses of any doctors or specialists that they have consulted will also speed up the information gathering process.
The worst scenario for a claims assessor is a poorly completed claim form that refers to vague symptoms or non-specific conditions. This means that the company must enter further dialogue with the claimant or their medical advisers which can lead to lengthy delays.
After receiving the claim form, the provider will get a report from the claimant's General Practitioner (GP) to confirm their condition or to determine when a condition was initially diagnosed. It is usually at this stage that consultations and diagnosis dates can be checked against those disclosed on the original application. This is when cases of non-disclosure come to light.
Hurdles
Unfortunately, insurers must rely on medical specialists and GPs for evidence. With the strain on today's health service, completing forms is rarely a priority for doctors. A little gentle prompting from the claimant can help to speed up this process, so it is vital for the provider and the claimant to keep each other up to date.
In some cases, especially if the degree of disability is difficult to measure, the policyholder will be asked to see an independent specialist for a further opinion. This will involve attending an examination with a qualified specialist of the insurer's choice. The cost of this will be met by the insurer.
Once all the evidence is gathered together, the claims assessor will make a decision on the case.
Claim reviews
In the case of lump sum benefits, once a claim has been paid that is usually the end of the claims process. However, where income benefit is being paid while the claimant is unable to work, such as income protection or waiver of premium, then the insurance company will review the claim regularly. This is so they can monitor the rehabilitation, or otherwise, of their customer and ensure that costs are controlled by ceasing benefit payments when the claimant recovers and returns to work.
The claims manager will recognise any condition that is permanent and will decide that no further reviews are necessary. In these cases the insurer may consider a request to commute the benefits and pay a lump sum.
But protection providers often offer other services at the time of claim and beyond. There are now many support and advice services offered, free of charge, to policyholders that can provide sympathetic and impartial advice that can help an individual back to work or improve their employment and health prospects. Some companies also offer medical help-lines and counselling services and in most cases claims staff will have been trained in customer relations and communication.
Insurers expect claims and do not wish to make the experience any more unpleasant than it already is.
Roger Edwards is product marketing manager at Scottish Provident
