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a worrying message from australia plus a new approach to critical illness

a worrying message from australia plus a new approach to critical illness

Without doubt the big news this week in protection was AIG’s virtual reinvention of their critical illness product. Protection Guru explored this in detail both in our initial analysis AIG make welcome move towards impact-based cover, and in the AIG Critical Illness showcase page we have created working with the insurer, to identify the key elements of their fresh approach which advisers should understand to have a comprehensive knowledge of the product. If you have not yet read both in detail, I would urge you to add them to your weekend reading.  

In our general market analysis this week we started with Sam Shaw looking at joint life separation benefit who does what?. Canada Life, Guardian, Royal London, Scottish Widows and Vitality are highlighted as insurers that are most helpful in this area, you can find out why in detail from the link above.  

On Wednesday Sam looked at nutritional support who offers what. The way in which long-term insurance products are evolving to also provide benefits in consumers day-to-day lives is, I believe, one of the most positive developments in the market for many years. By providing these benefits protection is increasingly becoming a lifestyle choice, not just contingency against disaster.  

Rightly or wrongly, consumers are far more focused on things that they see as complementing their lifestyle than they are protecting their families. Why else would most spend more money on Starbucks and streaming services than they do on life insurance and income protection? Large numbers of consumers increasingly care about their health, and indeed as Vitality have taught us, those who do, are better risks. By adding these benefits insurers are making their products more relevant to consumers day-to-day lives, if that encourages more people to take the protection cover they need, it has to be a good thing. 

Yesterday Amanda Newman Smith explored Who has the broadest eligibility for children’s critical illness cover . Guardian, Royal London, and LV= all and earned praise for their approach.  

Today in the latest of our everything you need to know studies Steve Berry looked at a range of Income Protection Product Features that are important for advisers to consider.  

Over on our sister Benefits Guru site, Amanda Newman Smith this week considered financial wellness and looked at How pension providers are delivering financial education, a subject that also has significant cross over to the protection world.  

Elsewhere in the world I was really interested by data published this week by the Australian Prudential Regulatory Authority looking at life insurance claims and disputes data for the period 1st July 2019 to 30th June 2020. The report reveals a shocking contrast between the number of claims paid where an adviser is involved and the number paid where policies are purchased direct.  While  96% of death claims were paid for consumers who bought individual policies via advisers only 89% of claims were paid for customers who bought direct. To be fair for trauma cover, the Australian name for Critical Illness, the direct channel outperformed advised plans.  87% of claims were paid for direct customers against only 85% for advised.  

Notably 95% of group disability claims were paid in Australia compared with only 82.5% of new 2019 UK Group Income Protection claims according to GRiD statistics. How can it be acceptable that a group income protection customer is 3.5 times more likely to have a claim declined in the UK than they are in Australia? There appears to be overwhelming evidence of clear consumer detriment and this strikes me as something the FCA should investigate urgently. In both countries group trauma/critical illness plans only paid out 78% of claims, so over one in five claims are declined.  

By comparison several insurers who operate in the individual protection market, as well as group risk have far higher payment rated for individual contracts.

2019 claim statistics

Individual Critical Illness

Individual Income Protection
Legal & General

I doubt they had different approaches to claims between individual and group, so what is dragging group payment rates down? Personally, I find this very worrying.

Have a great weekend everyone. 

About The Author


Ian McKenna is the founder of Protection Guru. A 40 year veteran of the financial advice and related technology markets. Having worked for insurance and financial advice firms in 1995 he set up Financial Technology Research Centre, which publishes Protection Guru over a decade before “fin tech“ was recognised as an industry term. He believes passionately that far more people can be protected by life insurance and related contracts if we can demystify these and make objective comparative information on policies more accessible.

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