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Lift the curtain on claims data

New data on life insurers reveals how they perform on processing claims, but it leaves us hungry for more insights.

Insurance is a product that is inherently difficult to understand. With long policy documents, technical definitions and exclusions, the task of comparing policies is beyond most of us.

For many years, CHOICE has tried to bridge this gap. Our finance specialists spend many hours gathering data, comparing hundreds of policies in order to identify the best in each category. But understanding which policy offers the best terms only gets you so far. It doesn’t tell you what happens if you make a claim.

Until now, the only insight into the experience of people making claims was from data on disputes published by financial ombudsman schemes. This told us what happened if somebody was unhappy and made a complaint to an external body, but it didn’t tell us what insurers were doing in the earlier stages.

A new project from our financial regulators has started to change that. In a world first, the Australian Prudential Regulation Authority and Australian Securities and Investments Commission have begun publishing data on life insurance, covering the percentage of claims that are accepted, how long you have to wait for a decision and how many of those decisions are disputed by consumers.

The first data release reveals a huge variation in performance. AMP takes on average 8.4 months to determine a claim for death benefits –eight times the industry average. Asteron, which provides insurance through Suncorp Super, has a dispute rate for total and permanent disability claims that is 12 times the industry average.

This sort of information would make you think twice before taking out a policy with either of these businesses.

The insights from this data only make us hungry for deeper intervention. At the moment, the data only tells you about how each insurer performs overall – it doesn’t tell you how this differs for each policy. It’s also limited to life insurance. We’d love to see policy-by-policy data across other types of insurance, so we can use it in our reviews of travel, car and home insurance.

Insurers are looking at these sort of figures all of the time, because the more claims they deny, delay or obstruct, the greater their profitability. And conversely, the more claims they accept, and the lower the rate of disputes, the more likely it is that they’re selling policies that meet their customers’ needs and expectations.

We’d like to see regulators doing more to expose the differences in how claims are handled. Insurers that are doing the right thing by their customers should support this. The only firms that need fear greater transparency are those that are profiting from selling policies that offer little value to their customers.

Read more: Life insurers AMP and Asteron dragging their feet on claims

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It would be easier to give thought to the meaning of these graphs if some clues about the method of collection of the data was given, or even the collection period. We don’t know if this represents one month in 1986, the aggregate over the last tens years, or some heterogeneous comparison invalidated by incomplete data. If you want statistics to be taken seriously you have to justify their validity.

On the face of it the AMP performance on death benefits is such an outlier it is way beyond incompetence and well into deliberate policy.

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One may reasonably assume it was as indicated,

according to 2018 data collected by industry regulators APRA and ASIC.

but as you wrote, that could mean almost anything without further elaboration.

Since AMP was roasted by the RC they probably have many similar deliberate policies to disadvantage their customers, although probably fewer this year than last :wink: AMP does seem to reflect the worst of corporate practices then, and the new senior management has done little except reduce the number of their ‘financial leeches’, er ‘advisers’ by buying back their practices for what was reported to be pennies on the dollar as compared to past times.

It is rare for a company to attract as much stench from all sides as AMP has managed despite their long history.

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Silly me I missed that. Labelling each graph with its source and content would make it clearer. It also avoids Sod’s Law 3.6C which says ‘Anytime explanation or clarification of a chart, image or graphic material is not placed directly adjacent the object it refers to it will get separated from it.’

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