Nearly all (99.5 per cent) of group life assurance claims were paid, but this rate fell to 75.7 per cent for group income protection and 77.7 per cent for critical illness cover.
“These rates aren’t good enough,” according to Ian McKenna, chief executive of the Financial Technology Research Centre. “I just don’t see how an insurance sector can justify operating on a basis where one claim in four gets declined. Something has to change.”
McKenna suggests using technology to help employers underwrite each policyholder properly as a way to improve the proportion of claims that are paid.
While this may be more hassle for the employer in the short-term, he said there was “no worse scenario than telling your staff that they are insured and then, when they need to claim, the insurer does not pay”.
While insurers often publish their individual protection payout rates, the group protection sector publishes industry averages. This means you cannot tell which insurers pay claims more regularly.
Moxham says that 100 per cent of genuine claims were paid, and that the reason for the lower claim rates was due to the fact the employer was the policyholder.
This adds an extra layer of complexity, as it can be hard for the employer to be sure that each claim is genuine or valid under the policy, as they may not know the ins and outs of the employee’s health situations.
“From the adviser’s side, it’s really important that if you are recommending protection, you take into account any group protection your client may have — it can be a great asset,” adds McKenna.
“But by the same token, I would make sure that any medical conditions have been disclosed and that the terms and conditions of the policy are clear.
"You don’t want your client to be one of those one in four.”
Imogen Tew is a freelance financial journalist
