In its submission to the life insurance inquiry, BT said an overly simplistic approach to claims data that does not compare ‘like for like’ risks misinforming consumers, and that it is important to recognise the complexity giving rise to the variations in claims decisions.
“We support mandatory reporting of claims however, to protect consumers from distortions that could drive inappropriate choices, the principle of ‘like for like’ should be rigorously maintained when designing a statistical solution,” the submission said.
BT provided an example (Figure 1) where the counting of existing claims “distorts the real decline rate for the consumer and disadvantages the company with fewer existing claims.
“Newer companies with younger insurance books are likely to have fewer existing claims,” the submission said.
“This potential distortion against newer companies may also flow from the nature of their consumer demographic.”
Figure 1: Reporting distortion based on methodology
Source: BT Financial Group
BT showed another example in its submission (Figure 2) where distortion of data could be reported based on variations in consumer demographic.
“Company A and Company B both decline 34 per cent of TPD claims for customers under 40 and 25 per cent of claims for customers over 40,” the submission said.
“Company B, with a younger demographic, could appear to have a higher decline rate when both companies have exactly the same approach.”
Figure 2: Reporting distortion based on variations in consumer demographic
Source: BT Financial Group
So it’s ok to stitch up advisers with false lapse data but when an insurance company gets caught out for over declining on claims the data is flawed???!!!
Yes Katherine, I felt the same when reading. How different it appears when light is focused on the other parties with statistical reporting.
I find it funny that when companies are suddenly impacted by this, that they start to care so much. Where was the “up in arms attitude” when it came to how to define a lapse. Now that claims data may be skewed, it suddenly matters when it comes to defining the reasons.