How overpaying claims leads to product innovation
Most of the mainstream news media delight in telling people about when an insurer declines a claim. They love it. Insurers are just moustache-twirling financial villains in their eyes.
Tuesday, July 27th 2021, 9:21AM
by Russell Hutchinson
The truth is that most insurers pay out an awful lot of money to an awful lot of people – faithfully executing their contractual obligations over and over again.
What few know is that sometimes they pay more than they need to. Not by accident, but by choice. It can be the right thing to do.
Why do insurers pay more than their policy wordings require?
That is an especially valuable point when you consider there is an equity issue to be managed – other policy holders may not be pleased to hear that some are getting more than they ‘should’.
But it can make sense. Take the specific injury innovation. This emerged from an insurer working out that costs of assessment are sometimes not worth the bother.
If you know that on average a broken arm should take 12 weeks to heal, there really is not much point in assessing the client three times in that period.
Pay them the total and do not worry about the ones who ‘won’ a little by recovering quicker – it is offset by the saving in assessments.
Another area where paying more helps is when early intervention matters.
One insurer, for example, introduced occupational retraining and support for some clients during the wait period.
It is plainly a practice common in their claims area – but it is not (yet) reflected in all of their income protection wordings. They will not be alone.
The message for advisers is that the policy document is a minimum and sometimes you will be able to construct a case where the insurer is willing to pay a bit more – and it would be worth it for everyone concerned.
But of course, the policy remains the bottom line, you cannot rely on the insurer choosing to pay more all the time. For that, you need the benefit to be committed in print.
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