You know that protection providers pay 90% of protection insurance claims don’t you?
The scary thing is that, according to a new Infographic by Life Search, the public think that companies only pay 38% of claims.
Why is there such a wide gap between perception and reality?
Well 20 years ago perhaps 30% of protection claims were declined. Not an impressive figure but still nowhere near as high as public perception. Now two decades on thanks to initiatives by the Association of British Insurers to cut non-disclosures, clearer questions on application forms, and easier to understand definitions, companies pay life assurance claims in the high 90%s and critical illness claims in the low 90%s. Even income protection claims sit in the high 80%s.
And yet still the public think the figure is as low as 38%.
I was on holiday recently and as usual I browsed the books in WH Smith’s before the flight out. A book caught my eye, called “The Art of Thinking Clearly” by Rolf Dobelli. I read a couple of chapters and was immediately hooked enough to buy it.
So what has this got to do with the public thinking that companies only pay 38% of protection insurance claims?
Well “The Art of Thinking Clearly” gave me an insight into what is going on here. The 38% claims paid figure prevails because of the way humans think and the way we filter information. The chapter in the book about “Confirmation Bias” was a revelation.
What is confirmation bias? It’s a tendency of people to seek information that confirms their beliefs. People gather or remember information selectively and then interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. They also tend to view ambiguous evidence as supporting their existing view.
So if someone has heard that companies only pay 38% of protection insurance claims, despite the fact that they can find many arguments to the contrary on the Internet, they will select the articles that confirm their view-point and deliberately or subconsciously ignore those that conflict with their view. You can now see why it is so hard to convince them of the truth. Their belief is so deeply entrenched that they will only acknowledge the information that confirms their view.
Providers, advisers and media commentators therefore have a tough job to overcome this perception. However I believe that slowly we are starting to change that perception. There is still a long way to go though. And we need more positive stories than ever about successful claims and how they have rescued people’s financial affairs.
Confirmation bias works both ways though. We are also subject to confirmation bias. We will naturally seek out the information that supports our view that companies pay 90% of protection insurance claims. To become better at helping our clients we should have a closer look at the articles and reports that support the myths so that we can even better understand them and refute them.
Now it’s your turn: You might think that talking about “confirmation bias” was a strange concept to introduce into a blog about protection insurance. But I found the concept fascinating. What do you think? I would be very interested to hear your views. Please leave a comment below or post a link to your own blog.