One way or another, the protection industry is set for a significant rise in claims.
Although multiple insurers are reporting a fall in the number of critical-illness cover claims coming through compared with previous years, this is likely to be temporary, on the basis that many people aren’t seeing their doctor and aren’t being diagnosed with conditions that would lead to a claim.
If thousands of CI claims are being delayed, there is a further concern that, by the time these reach insurers, the illnesses may be further advanced – as opposed to being detected early. This could result in higher payouts for severity-based plans – or in some cases what might have been a CI claim may become a death claim.
The situation for income protection may also become incredibly challenging. The potential longer-term mental-health impacts are becoming well documented, but there are also myriad other long-term impacts of the virus.
Health and wellbeing expert Monica Garcia says: “From an IP claims perspective, the mental health toll could be high in the long term.
“People’s ability to access social support (emotional and practical) through extended family and other social interactions remains affected.
“I am concerned that the struggles the general population are feeling will eventually reach a tipping point, and many IP policyholders who have been coping so far will eventually be impacted.”
According to Andrew Wibberley at Alea Risk, economic turmoil always leads to a rise in claims.
He says: “An economic downturn always leads to a rise in IP claims, but this time the form it takes may be less predictable.”
What might this mean for advisers? It probably wouldn’t surprise anyone if prices for new protection policies started to rise, which means getting cover in place now may not be the worst idea.
Whether we see price increases – and how big these may be – will largely depend on market forces, but either way, insurers are expecting a significant rise in claims – which often leads to higher prices.
Advisers can play an important role, too.
Alan Knowles, managing director at adviser firm Cura, says: “Advisers have a huge role to play here. If we truly are expecting a rise/catchup in the number of critical-illness claims, then it’s up to advisers, with the support of providers, to help customers keep their policies in place as times get tougher financially for many people.
“Premium holidays, cover reductions and reminding people of policy benefits are just some of the ways we can help.”
Wibberley added: “Insurers are doing a great job of loudly flagging a decline in CI claims, which is a reason to be concerned for both customers and insurers in the long term as missed checkups and tests will inevitably lead to even worse prognoses in time.
“It makes sense for insurers, advisers and charities to direct people towards the many value-added services associated with policies to encourage them to get help proactively through this team, rather than waiting for things to get worse and result in a medical and/or financial emergency.”
This is where care and support services – that is, added benefits such as remote GP services, counselling, second opinions and rehab – should really prove their value, and if they don’t get used now, maybe they never will.
Gruesome claim declined
A woman who deliberately cut off her own hand to claim £925,000 from insurance policies has been jailed for attempted insurance fraud.
Prosecutors said Julija Adlesic, from Slovenia, had taken out five insurance policies a year earlier and her partner had searched online about how artificial hands worked.
It was alleged the couple wanted to make sure the disability was permanent so that the protection insurance policies would be paid out, but their plans were scuppered when police became suspicious.
The protection industry is often challenged for being over-cautious and declining claims, and sometimes fairly so. But this extraordinary story shows that a minority of people will go to any lengths to commit fraud.
Cases like this are extremely rare but highlight why we might never quite get to a 100 per cent payout record for all claims.
Kevin Carr is Protection Review CEO, MD of Carr Consulting & Communications and IPTF Co-chair
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