Alan Lakey: The role of gender in critical-illness claims

It was 20 years ago today. No, not when Sergeant Pepper taught the band to play – that was 1967. I’m referring to the year when insurers began releasing statistics around critical-illness claims.

Back in 2004, the declinature rates were scary, with Aegon rejecting 28% of claims and Aviva 26%. The figures were unacceptable and a stain on the face of the protection industry. The BBC’s Panorama devoted a whole programme to the problem and the representative from the Association of British Insurers (ABI) sat uncomfortably as a litany of examples and statistics were unveiled. This bad PR, picked up by the financial press, dissuaded many from taking out a valuable protection plan.

Thankfully, this public embarrassment galvanised the industry into a rethink and all insurers, albeit some grudgingly, opened their claims-statistics doors. This new transparency also had the effect of reducing the percentages of declined claims, with the 2008 figures showing Aegon rejecting 9% and Aviva 10% –  figures not too different from today’s declinature rate of around 8%.

So far so good. But the question I’m posing is what exactly is it that insurers are attempting to show to both advisers and the public?  The annual claims announcements tend to focus on the percentages of claims paid, the total financial sums paid and the three or four main causes of a claim.

What many do not realise is how statistics hide major disparities between the sexes

While this is useful as top-down information, these figures in isolation actually serve to misinform because the information provided is missing an important ingredient. An ingredient that informs advisers and consumers alike. An ingredient that advisers are able use to their advantage when assessing which plan to recommend. An ingredient that assists in promoting the use of two single-life plans as opposed to a joint-life version.

The ingredient I’m referring to are claims stats that are gender specific.  Most advisers are aware that cancer is the main cause of critical illness claims, with the latest statistics showing that it accounts for between 59% – 68.5% of all paid claims. What many do not realise is how these statistics hide major disparities between the sexes.

The table below focuses on the top six reasons for a paid claim using data supplied by a leading high-volume insurer and serves to emphasise the incongruities.

With cancer, we can see that it accounts for almost 75% of all female claims, whereas only 3.5% of female claims relate to heart attack.  Conversely, male cancer claims sit at around 50%, whereas heart attack accounts for almost a fifth (17%) of their claim total – almost five times the total female claims for the same cause.

Multiple sclerosis and benign brain tumours are female-oriented claim conditions, whereas Parkinson’s disease is a male domain with a ratio close to 4:1.

This type of analysis assessing value and outcome is essential in meeting the Consumer Duty requirements

Armed with this knowledge, the adviser is able to select the most appropriate plans for his clients using the knowledge and analysis within sites such as CIExpert. This type of analysis assessing value and outcome is essential in meeting the Consumer Duty requirements, so I call on all insurers to provide this information.

While on the subject of claims information provided, a word or two must be reserved for those insurers providing income protection. There is no clear guidance regarding how to provide this information, with some advising of new claims during the year, others choosing to use all claims being paid (which boosts the percentage figure) and some, like LV=, providing both.

For advisers wishing to instil confidence in the industry, these disparate figures present a major challenge and I would guess that many advisers are not even aware of these differences. This appears to be an area calling out for the ABI to moderate.

Alan Lakey is founder of CI Expert