The Protection Distributors Group (PDG) has criticised insurers for their handling of mental health claims on income protection (IP) products and appealed for them to improve several areas.
The trade body said it had heard from advisers who have seen claims turned down relating to issues like bereavement and work-related stress and urged insurers to be clear in their communications.
It implored insurers to be clear with advisers that having a sick note would not guarantee an approved claim and for language to be clearer in terms and conditions and application forms.
As a result of these issues, the PDG is publishing a guide aimed at helping financial advisers understand potential issues surrounding income protection (IP) claims related to stress and mental health.
Data from the Association of British Insurers (ABI) and Group Risk Development (Grid) showed only a combined 81.3% of new individual and group IP claims were paid in 2023, compared to 96.7% for life insurance and 90.5% for critical illness.
The PDG has highlighted three key subjects where it believes insurers can improve their workings and produce better outcomes for customers.
They are:
- Business development managers (BDMs) and frontline staff using the same clear messaging when talking about their products to advisers. The PDG recommends that work-related stress is not used as a claims example, as this is often a case-by-case decision rather than a certainty of claim. Additionally, to be clear with advisers that income protection is not guaranteed to pay out because the claimant has a sick note from their GP or other medical professional.
- Reviewing terms and conditions and policy summaries. Are they clear on this issue? Do they provide details on how claims are considered for mental health, or that having a sick note doesn’t automatically mean a client has a valid claim? The PDG says clarity here is critical to avoid customer confusion and ensure transparency, especially for those who buy without advice.
- Consider the language used in application forms and exclusions. The PDG points out if stress is not considered a medical condition, it should not be referred to as such in any part of the insurer’s documentation. It adds clear and precise language is essential for both adviser and customer understanding
Alan Knowles, board member of the PDG, (pictured) said: “Our objective is to educate advisers on some of the nuances of income protection claims for mental health, enabling them to prepare clients for what is most likely to result in a successful claim.
“However, adviser education is just one part of the jigsaw. We believe insurers also have a critical role to play in improving outcomes for customers.”
Neil McCarthy, chairman of the PDG, added: “This new guide delivers a helpful summary to advisers helping them understand the potential issues surrounding IP claims related to stress and mental health.
“Over the last few years, the PDG members have published several guides covering the following topics: improving customer retention, early warning and lapse processes and signposting protection.
“We hope to generate more useful bulletins to make it easy to write protection, working with our members and insurers.”
The guide is now available for download on the PDG website.