High claims acceptance among insurers: Report

APRA and ASIC data has shown that 94% of life insurance claims from the major insurers were accepted over the year to June 2019, though with significance variance between cover types.

The regulators have come together to publish data on life insurance claims and disputes for the 12-months to 30 June 2019.

The data reveals that while 99% of claims in the category of group ordinary death and individual non-advised funeral were accepted, only 36% of claims for individual-advised accidents were accepted.

The data also found that Individual Advised business shows higher admittance rates than Individual Non-Advised for the same cover type.

"This could be due to the policyholder having clearer expectations up front of what is covered by the product, or (related to the previous point) the adviser discouraging the policyholder from lodging a claim that is not covered by the policy," the regulators said.

"The exception is Individual Advised Accident, which has an unusually low admittance rate."

However, the regulators note that while claims for individual advised accidents are low, this is based on only 11 finalised claims, compared to 3563 for non-advised claims.

The regulators also looked into the claim ratios by cover type and distribution channel, finding that there is a significant variance between products; ranging from 4% for individual advised accidents to 105% for individual non-advised.

"It is notable that two of the four products with the lowest claims paid ratios have a relatively large sample: Individual Non-Advised Funeral (12,299 finalised claims) and Individual Non-Advised CCI (8336 claims)," the report said.

"In general, Individual products will have higher acquisition costs associated with the policy compared to Group products. As these costs will make up a larger proportion of the overall premium income, the claims payments will be a correspondingly lower percentage."

The report said insurers are not accepting as many claims for things like TDP, trauma and accidents due to the complexities of accessing the claims, whereas deaths and funerals and relatively straightforward and are accepted sooner.

The regulator said that this can often lead to a large number of undetermined claims at the end of the reporting season.

Read more: APRAASIC
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