DURBAN - It is worry some to see that many providers in the life insurance space are promoting their brand on the back of paying out all valid claims, as if this is a unique selling proposition.
This trend should be discharged with contempt, as paying valid claims is a contractual responsibility and the minimum industry standard.
The idea that insurers believe they are doing something special when paying a client for a claim is reiterated in the Long-term Insurance Ombudsman report from 2016, where it recognised "“Insurer behaviour that suggests that a claim is being avoided at all costs. This is where the insurer is evidently/demonstrably looking for reasons not to pay what appears to be a valid claim, often by raising a new defence if the original reason for declining a claim does not succeed".
So, while insurers may pay out claims on the face of it, they only pay after going through great lengths to nullify these claims.
This should be worrisome for the industry at large. Getting valid claims invalidated is unethical and goes against the principles of good governance. In addition this shapes the impression in the broader consumer market that insurers try to find reasons to not pay out.
One potential reason for this situation can be derived form increased market competition. This pushes the trend of undercutting premiums as a market infiltration strategy and new business obtaining tool with both individual and group risk providers. This results in an undignified race to the bottom, using price as the only way to differentiate between various insurance products.
Lower premiums have an affect on the viability of the product, which creates a perverse incentive for insurers to look for ways to avert paying by invalidating claims.
In the end, policyholders get what they pa for in regards to cover. While lower premiums may seem like an attractive proposition, policyholders should also feel that their insurer of choice will indeed pay for all valid claims.
Defining valid claims
In addition to claims that are invalidated, negative market perceptions when consumers expectations are not met due to the misunderstanding of what constitutes a valid claim. In certain cases, these definitions are vague.
For example, a doctor may medically board a patient for clinically relevant reasons, which can create certain expectations for policyholders. However, the medical definition of this disability may be incompatible with the specifically worded definition contained in the policy.
In terms of critical illness cover, while many conditions are are still paid out on the basis of the severity of the illness. The severity of the illness decided by factor slike the policyholders ability to continue working, the capacity to cover medical costs, the loss of insurability or a notable loss of life. Similarly, disability claims are determined based on the functional implications of the conditions rather than the diagnosis.
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Clear policy wording should therefore be important to any insurer. There can be no ethical reason for an insurer to sell a policy to a person who does not understand what they are buying.
From the view of the policyholder, they need to make sure that they are getting an insurance product that that will give them the cover that they need, whether there is an advisor who is a part of the process or not. They also need to understand the requirements under which a claim will be paid or declined, as explained in the policy. When a product is hard to understand or needlessly complicated, it should raise a red flag.
While unethical behaviour from insurers in authenticating claims is important, policyholders also need to make sure that they memet the policy requirements like full disclosure at the policy inception stage. If a policyholder has benefitted from a lower premium because of material non-disclosure at the stage of underwriting, the insurer would be well within his right to turn down the claim. This also protects the insurer from people who will attempt to exploit insurance policies for financial benefit, which is particularly prevalent during times of depressed economic conditions.
Objective claims specialists
Ultimately, however, the onus is on the insurer to pay out valid claims. The questions is in, the assessment process, is the claims committee tasked with looking for reasons to invalidate the claim or do they look for alternatives to find the best result for both the insurer and the customer?
To do so, the must be equipped with the education, knowledge and expertise to impartially deliberate on the facts and merits of each individual case, particularly the more complicated cases, but must also have empathy to understand that their decisions materially affect the lives of people, they are not merely validating or turning down claims.
From an administrative viewpoint, evaluating claims is not clear cut. For that reason. insurers that take a black-and-white approach seldom have the best interests of the policyholder at heart. When a person puts through a valid claim it is because they require financial support. It is the basic purpose of insurance.
That is why good governance dictates that insurers must process and deliberates all claims fairly, using established procedures to get the best result for both the insurer and the policyholder, even if that means making partial pay outs to meet financial shortages in cases where the insurers are within their rights to invalidate a claim.
This principle of looking for reasons to pay, instead of making senseless promises to do the bare minimum in paying all valid claims, is the standardall industry players should aim to achieve.
Walter van der Merwe is the CEO of FedGroup Life.
The views expressed here are not necessarily those of Independent Media.
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