The public’s payout rate perceptions show how much the insurance sector is mistrusted but it presents a great opportunity to provide quality advice
Zurich recently announced that in the first half of the year it accepted 100 per cent of income protection claims, paying out £6.2m in benefits.
Last year at Drewberry we published our health and protection insurance survey 2013 which assessed consumer perception and attitudes.
We found a significant difference between the perception of life insurance payout rates and how much insurers actually pay out. We asked consumers the following question: Of all the life insurance claims made in 2011 to the top UK insurers, what percentage do you think were paid out?
The average number of claims that respondents believed were paid out was 50 per cent whereas the actual number was 98 per cent (for Legal & General, Aviva, Liverpool Victoria, Scottish Provident and Bright Grey for 2011). While we know that there is a large gap between public perception and reality, the size of that gap is enormous. If consumers feel insurers only pay out 50 per cent of claims, it is not surprising workers are underinsured and believe protection to be “too expensive”.
This perception shows the depth of the lack of trust that the public has in the insurance sector but it also represents a great opportunity. Fully advising consumers on the best policies at the best value price, taking into account their needs and explaining the importance of income protection and all the ancillary benefits that come with protection policies (such as red arc, best doctors, buyback and much more) can only establish great credibility in the clients’ mind as well as customer loyalty.
Public misconception is a problem that both quality advice and increasing transparency through the publication of claims stats can alleviate. Meanwhile, advisers should take the chance to offer high-level protection advice that will be a pleasant contradiction to many people’s preconceptions of insurance and make your service memorable.
Tom Conner, Director at Drewberry Insurance
”What we’ve got here is a failure to communicate.” That classic line from the 1960s Paul Newman film Cool Hand Luke has resonated down the decades and it applies to the world of protection. For example, how many people who work outside financial advice know what the term refers to? Anecdotal evidence suggests not too many.
Protection is not the only industry that uses jargon. From fund management to car mechanics, acronyms and industry-speak are commonplace.
However, in other occupations, use of jargon can give the impression of competence and knowledge to the consumer, enhancing the possibility of sales. In protection it is harmful all round.
Engagement with and education of the consumer is arguably as important as gaining trust and loyalty and yet it is often the case that the huge amount of marketing material we produce in protection leaves the client confused, suspicious or just plain bored.
We spend too much time on the detail, we lose sight of what is important to the customer and we do not say enough about what we do well. For example, we need to be better at getting the message across that, on average, over 90 per cent of life, critical-illness and income protection plans pay out. The public perception is that securing a successful claim is a game of luck or chance.
That is why communication is the key not just to a successful sale but to good persistency rates too. A client appreciates an adviser who takes the time to guide them through the often complex purchasing process. For now we are stuck with some clunky terminology, but the way we express this to the client makes all the difference to the success of the protection advice process.
Damian O’Connor, Principal at Roxburgh Financial Management