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Insurance Review: Why annual statements are crucial

Providers issuing annual statements has no end of benefits for customers and it is difficult to think of a downside

It was great to hear AIG announce earlier this month that it is going to issue new protection customers with annual statements. This means that customers, and advisers alike, will start to receive statements from 1st July 2018.

AIG join the likes of Scottish Widows, Old Mutual Wealth and Zurich who already issue statements to customers, detailing the policies and level of cover that they hold.

Hopefully this is a sign that after many years of industry groups and individuals, such as the Finance & Technology Research Centre, calling for annual protection statements to be issued, we are going to start to see more and more providers jump on board.

Some have questioned the relevance of issuing statements, ‘Do our customers really need to be receiving a statement for their protection policies in the same way they do pensions?’ For me they are crucial for a number of reasons.

Firstly, it not only reminds and clarifies for customers the protection they do have but is also a way of reminding them of the cover they don’t have.

Often advisers will speak to customers who are sure that they have critical illness cover with their life policy yet when investigated, it turns out that it is only terminal illness cover that they have in place.

If one partner has taken the lead on arranging cover, a spouse may be expecting that there is more cover in place or possibly even different types of policies completely. Yet there are very few situations that arise to provoke cover being reviewed.

If annual statements become standard practice, it can be made clear to our customers what they are covered for, as well as highlighting areas where they may be under insured or not protected at all. They could therefore be a great way of ensuring customers regularly review their protection needs.

Particularly important if there has been a change in circumstances such as having children or a change in employment or marital status.

Furthermore, by issuing statements the household is reminded of what cover is in place. Policies may have been arranged many years before a change in circumstances. People may have a new partner who isn’t aware that any cover is in place.

We saw a recent example of this at L&C where a general review led to a spouse finding details of a policy held by her husband.

He had become seriously ill but she wasn’t aware he had any protection as they were newly married and he had taken out the policy alongside his mortgage some years earlier. The call led to her being able to make a claim, and I believe annual statements could lead to more instances of this arising.

L&C conducted research with customers, which confirmed overwhelmingly that they would find receiving statements helpful. In fact 95% of those surveyed would be interested in receiving a yearly statement, detailing the cover they currently hold, together with details of the additional benefits that accompany their policy.

Reminding customers of the great features that are part and parcel of many policies taken out today is another valuable benefit that would come with issuing annual statements. Currently, the benefits available to customers are laid out in the policy information when cover is taken – but is this doing enough?

Quite often life insurance or critical illness cover is taken out alongside a mortgage, one of the largest financial decisions people make in their lifetime. Although customers appreciate the importance of the cover and its additional benefits, such as free second medical opinions, at the time, there is understandably a tendency for customers to then file away their policy and forget all about it.

With fantastic new benefits such as LV= Doctor Services being introduced, reminding customers of these services isn’t only valuable so that policyholders utilise them, it could also lead to more policies being retained.

It demonstrates and reminds customers that protection policies have living benefits as well. In today’s society where rewards systems have also become an expectation, getting extra value can only be a good thing.

Notifying customers of how to make a claim is also incredibly useful. If a policy was arranged 10 years ago, what are the chances of ‘how to make a claim’ still being easily accessible? It’s much more likely that a statement issued in the last year would be more readily at hand making the process of making a claim, at an incredibly stressful time, much easier for our customers.

This is no doubt why over 77 per cent of customers who replied to our survey said it would be helpful to be notified of details of how to make a claim, along with a contact number, if they were to be issued with a statement.

The survey results and subsequent information received really added weight to what we at L&C thought. Providers issuing annual statements has no end of benefits for customers and it is difficult to think of a downside.

We of course recognise that legacy systems will make it difficult for some providers to issue statements quickly and easily, yet we are sure that if the will is there, a way can be found. Moreover if it is in the best interest of our customers, a way should absolutely be found.

Lucy Brown is head of protection at London & Country Mortgages

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