Insurers should stop boasting about paying 99% of claims

Insurance is often cited as being one of the least trusted industries in the UK.

It doesn’t seem much of a leap to assume that confidence in the industry was severely damaged by the payment protection insurance scandal – which dragged on from the late 1990s all the way through the noughties and into the 2010s.

But with PPI starting to move into the rear view, what’s been happening in recent years?

Although the Chartered Insurance Institute publishes something it calls the public trust index, this doesn’t actually go very far towards explaining whether trust is increasing or diminishing.

Advertising straplines such as “We pay 99% of claims” give people the impression that insurance will be there for them no matter what. In reality, most insurances cover a core set of risks, which don’t include a raft of things that many consumers expect them to.

But new data from Fairer Finance shows that the picture over the past decade has been steadily improving.

Our new Trust in Insurance Index shows that trust in most key general insurance products – car, home and pet – has been on an upward trajectory for the last few years.

Travel was also heading the same way until the pandemic, when the plethora of horror stories about stranded families and rejected travel claims finally punctured that sector’s progress.

But while trust has been improving, the launch of the index may mark the short-term peak.

With car insurance prices rising sharply – adding to the financial pressures that households are already under from other rising bills and mortgage payments – there’s every chance that things may be about to get worse.

Threat to trust

Most people don’t claim on their insurance very often, so trust is strongly correlated to how they feel about their price and the ease of setting their policy up.

The challenge for the industry now is to use this moment to demonstrate to customers that when times are tough, insurance is even more valuable.

If you feel like your financial resilience has worn to the bone, insurance has the power to protect you from an event that might tip you over the edge.

Part of the problem the industry has created for itself in recent years, is its inability to resist the temptation to advertise itself as being a panacea.

Advertising straplines such as “We pay 99% of claims” give people the impression that insurance will be there for them no matter what.

In reality, most insurances cover a core set of risks, which don’t include a raft of things that many consumers expect them to.

With more customers buying insurance direct – without the support of a broker or adviser to help explain what they’re covered for – the expectation gap in insurance is getting wider.

It’s time for insurers to have much more honest relationships with their customers – and to be honest about the things they know customers struggle to understand.

In home insurance, for example, the number one reason for repudiating a claim is that the damage was caused by wear and tear.

But explaining the boundary between wear and tear and an insurable peril is not easy – and it’s a challenge that many insurers side step.

Of the 48 brands in Fairer Finance’s home insurance customer experience ratings, only half even mention wear and tear in their online application journeys.

Some of the responsibility must also lie with comparison sites to do more to help customers understand what they are buying – and what is not included. Unfortunately, the hollowing out of products – and the growth of brand stacking – is creating an ever more complex landscape for consumers.

The FCA’s new Consumer Duty requires firms to prove that their customers understand their products – and the hope is that will be the catalyst for real change.

The only way to build long-term trust in the industry is to have much more honest conversations with your customers.

James Daley is managing director of consumer group and ratings provider Fairer Finance