Last week the Financial Conduct Authority published an unprecedented level of detail about how much home insurers pay out in claims, their claims frequency and claims rejection rates.
The publications are a pilot of the regulator’s attempt to help consumers assess value, which it says is difficult due to the lack of commonly available measures.
It stresses that the data is not targeted at end consumers, but it expects market commentators and consumer groups to use the scorecards as part of their analysis of providers.
It also points out that insurers can use the information to benchmark themselves against others.
And so we learn, for example, that Zenith Insurance accepts between 75% and 80% of the home insurance claims it receives, while RSA pays out on 97.5% to 100% of claims.
The average claim payout by NFU Mutual is £5,000 to £5,999 whilst for L&G it’s between £1,000 and £1,499.
The data release was, predictably, greeted with press articles naming and shaming the companies and products that are least likely to pay out or be used.
The key metric this data misses
While we think the FCA objective is a sound one, our view is this data is somewhat simplistic. For example, does the above mean Zenith is less generous, recruits customers more likely to claim or has a stronger claims handling capability – or some combination of those three?
More importantly, perhaps the key metric this data misses is levels of customer satisfaction. It would be quite possible for a consumer to feature as a positive statistic but be entirely unsatisfied with the time it took for their claim to be settled and the communication process on the journey, for example.
Another weakness is that the FCA asked underwriters for their data, making it harder to translate into customer experience from a brand point of view. Only a few consumers considering a quote from Swinton, would think to conduct research on whether Covea, Allianz, Ageas, L&G or LV (listed as being on the broker’s panel in the FCA’s tables) were reliable at paying claims when it is the broker they put their trust in at the time of purchase.
Indeed, only four of the ten brands which according to thousands of consumers have the most satisfactory claims experience are included in the data, chiefly because of the exclusion of brokers.
Where the data becomes yet more challenging is its assumption of how to measure value based on the likelihood to claim and average payout. The Guardian used information about home emergency and replacement key add-ons to argue that consumers would be better of self-insuring.
The argument is easy to follow for cover which naturally has a lower cap and for consumers who can afford the payout. But it’s a fair challenge to insurers to prove the value of these products or improve them.
Only part of the jigsaw
Finally, evaluating value based on what seems to be an underlying question of ‘will I make my premium back’ becomes dangerous for potentially catastrophic claims such as personal accident where consumers are paying for peace of mind and the means to help with key life choices resulting from an accident. Clearly in this case, they hope very much they won’t have to make a claim.
On balance, the data is a useful additional piece of the puzzle to increase transparency and make it easier for consumers to make informed decisions. It will challenge insurers to stay relevant and competitive, particularly with add-ons. And for the better performing brands, data it can refer to independently will be welcome. But it is only part of the jigsaw.
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