Why insurers have an image problem and how it can be fixed

The public's perception of insurance companies is not particularly favourable. Graham Putt explains that it is up to the industry to promote its positive role to clients.

The insurance industry is faced with a challenge when it comes to promoting positive consumer experiences and developing its reputation.

From natural disasters to health issues, there have been cases where insurance companies have not acted in the best interests of the policyholder — usually at times of personal crisis.

To the general public, this can leave an impression of the insurance industry as being mercenary just when it is most needed.

We may know that this impression is invalid, but nevertheless it fuels the fire that the industry has a public relations problem.

In reality, claims paid on retail life policies in 2008 in Australia totalled $3 billion, according to the Risk Store. In 2008, CommInsure alone paid out over $460 million in claims — $240 million for term; $45.3 million for trauma and critical illness; $91.2 million for critical illness; and $86.7 million for all definitions of total and permanent disability (TPD).

On the general insurance side, CommInsure set up a major aid program for the Victoria bushfire victims and paid out more than $90 million in home and contents claims.

However, it is the claims that may not have been paid, along with media comments, that resonate with the public.

Unfortunately, not all claims are genuine. In 2008, we paid out 99.5 per cent of death claims and 92 per cent of income protection.

Part of the gap can be attributed to fraud, which tends to increase in tough economic times.

Speaking up

It’s time for us to take the microphone back and, as an industry, start promoting the positive support we are delivering to our clients.

For insurance companies and advisers alike, spreading the good news about insurance can simply be sharing positive claims stories that highlight what our job is really about: helping people when they need it the most.

Just last year CommInsure paid its first lump sum payment option under an income protection policy with a claim for around $1.7 million tax-free to a policyholder who was left quadriplegic after a serious cycling accident.

The adviser, Bedri Sainovski, had added the lump sum payment option to his client’s plan in late 2007 and the cover was in place for barely six months when the accident occurred.

Through choosing the lump sum payment, the client saved over $600,000 in tax.

The lump sum also allowed him to adapt his house and fly to the United States for the latest specialist treatment. The client is now following an intensive rehab program and has miraculously started to walk small distances.

Speed of payment and customer service is another key component by which insurance companies are judged. In a people business such as ours, we thrive on referrals and positive word-of-mouth experience — the barbeque test.

In 2008, CommInsure significantly improved the quality and speed of our claims process.

Specifically, we reduced the amount of time required to make a payment on a TPD/trauma claim by more than 20 per cent on the previous year.

Raising public awareness

Sometimes the stories that we have to share will not be so positive, and it is here that the industry’s role turns to education.

I was talking to an adviser recently who had sold a life policy to a 21-year-old truck driver and his 19-year-old wife, who wanted to protect the modest mortgage on their new house.

The policy was active for two years, then the monthly premiums stopped. Nine weeks later the policyholder was tipping the tray on the back of the truck and the top of the tray hit some power lines. He died instantly.

The wife, a short time later, asked the adviser about the life policy and how she could make a claim. It was for $100,000.

The policy, however, was deemed to have lapsed and the insurance company (not CommInsure) denied the claim.

A cheque for the missing premium was found behind the seat in the cabin of the man’s truck. Even worse, his wife was five months pregnant.

In this instance, our industry could have done better. However, what we take away from this is a strong story about the role of insurance that can also be shared.

As an industry we are very good at talking about underinsurance, the challenge now is to heavily promote another compelling truth: we pay claims.

Through your day-to-day contact with clients, you have the power to change public perception about insurance.

Feel proud to talk to clients about the positive claims case studies that you have and know are an everyday reality for our industry.

Let your clients know that in tough times, and times of crisis, they can feel assured that their most valued assets truly are protected.

Graham Putt is CommInsure’s general manager, market development and distribution.