The Financial Conduct Authority (FCA) is to conduct a pilot scheme in summer 2016 where it will publish information on its website regarding whether insurers reject or uphold insurance claims.

The information will be published for critical illness, income protection (permanent health) and private medical insurance policies. The following data will be published:

• How often policyholders make a claim
• The proportion of claims upheld
• The size of the average payout

Christopher Woolard, director of strategy and competition at the FCA, said the initiative would have a positive effect on insurance companies, “encouraging them to focus on improving the value and performance of their products, whilst giving stakeholders and consumers more insight into the value they offer”.

Roy McLoughlin, IFA at London-based firm Master Adviser, said that the publication of the data could boost consumer confidence in the insurance industry. He said that making the data public was “essential if an adviser is to have faith in delivering the message that polices do pay out”.

He added:

“Remember that research tells us that the distrust the public has is still at an unacceptable level. We do not desire league tables. However if we don’t deliver this evidence then the consequences will be fatal as the consumer and adviser faith in these essential products will diminish.”

The data may be used as another way for financial advisers to compare different insurance providers. Any adviser who has access to a range of insurers would be expected to include premium-based research in their client files. However, it is not automatically expected that advisers recommend the cheapest product in every case, although each file should justify why a particular insurer was chosen.

Factors, other than initial price, an adviser can use when comparing insurance products include:

• The range of illnesses covered
• The definitions used for various illnesses, e.g. is a successful claim likely on diagnosis of cancer or heart disease, or only when the disease has reached an advanced stage?
• The criteria for assessing claims, e.g. are income protection claims based on the individual’s ability to carry out their regular occupation, to carry out any occupation or to carry out a number of specified physical tasks?
• The availability or otherwise of premium reductions if the policyholder can demonstrate they lead a healthy lifestyle
• Whether the premium and/or benefits are fixed or will rise each year
• Whether the premium and/or benefit level is fixed throughout the policy term, or is subject to review by the insurer
• The customer service standards of the insurer

However, if using a provider’s claims record as a justification, advisers must remember that past data is not necessarily a guide to the future – a similar caveat to the once that applies when using investment performance data as a justification for recommending a particular investment option.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.