Personal accident insurance does not appear to be attracting the public, reports Christopher McKevitt Providers argue that given the number of accidents each year, and the low cost and ease of purchase of policies, the industry should be doing more to sell cover.
Several years ago, while at a Christmas party, a person who had nut allergies ate a roll with walnut butter. The result was an anaphylaxis and death. Subsequently, IGI Insurance deemed the incident to have been an accident and honoured the insured estate with the sum insured. More recently, another individual bought a personal accident policy for his son. The son was involved in a road accident and was left a paraplegic. Anthony Kidd Agencies, the insurer that had sold the policy, paid out £50,000 (the full sum insured) to help the family modify the house to accommodate the son's disability. These are just two examples of the role of personal accident insurance in society.
The first, arguably a freak accident, involved a tragic fatality. The second, a relatively routine sort of accident, caused desperate, debilitating and life altering injuries.
In 1998, the latest year for which detailed statistics are available, there was a total of 3,421 deaths and 40,834 serious injuries in Britain. And that was just on our roads. But accident statistics are to be found for almost every walk of life for any broker looking for evidence to bolster its sales pitch on the relevance of personal accident cover. For example, a recent six-month study at the Leicester Royal Infirmary recorded one horseriding accident every 39 hours. That works out at around 160 riding accidents in total, and five of these resulted in death.
The modern day product has its origins in the Second World War, when citizens bought Death and Disability cover in the event of being killed or injured in the blitz.
Yet 60 years on, personal accident insurance does not appear to be capturing the public imagination. Many providers argue that it has yet to emerge, in its own right, as a key insurance consideration for ordinary individuals.
Why? It is not because it is expensive; personal accident insurance is one of the cheapest covers to be had on the market. An individual policy will cost on average between £200 and £250 (though this varies considerably depending on employment hazards).
Nor can it be because it is hard to buy. Most insurers seem only too willing to sell it with the assistance of a simple direct debit mandate.
And it should not be because the concept behind the product is overly complex; the mechanics revolve around receiving fixed benefits in the event of accidental death or injury where the injury is permanent or prevents the individual carrying out his or her normal occupation.
Perhaps it is too inflexible? Hardly - especially when you consider that the starting base of regular payments can be extended to include lump sum payments covering loss of limbs and disabling injuries. Also, as in the first example above, a personal accident policy can become life assurance by another name with lump sum payments in the event of death. And there are also extensions to cover ill health and redundancy.
Scant media coverage
There are other issues though. Insurance Times carried out an extensive search of the mainstream UK press over the past year and found just four articles discussing the merits of personal accident insurance. And that was across the entirety of Britain's daily and weekend broadsheet and tabloid titles supporting personal finance pages.
The Daily Mail featured an article encouraging parents to consider personal accident policies for their children. Another in the Daily Telegraph was geared around a mystery shopping exercise to secure personal accident cover on the web. The other two looked at personal accident cover for motor sports enthusiasts. One in the Belfast Telegraph concerned a threatened strike by Norhtern Ireland's motorcycle road racers over how they should buy their personal accident cover and the second, put out by a newswire service, discussed Michael Schumacher's $20m (£13.4m) personal accident cover as a formula one driver.
All that may not seem that remarkable. But compare it to the acres of coverage given to accident statistics from agencies such as the Health and Safety Executive and the DFEE and, suddenly, the level of coverage seems paltry in the extreme. A similar newspaper search for news coverage of UK accident statistics, revealed hundreds of articles. It appears the industry needs to encourage more of a public dialogue on the benefits of personal accident insurance in the press.
Product is undersold
"I would say they (people in general) are not aware that the cover is available," comments Mark Searcy, new business manager at IGI Insurance. He believes the product is both undersold and under-marketed. The company's own research - it has been underwriting policies since 1975 - suggests that only 10% of self-employed people have personal accident cover and that the potential take up is "massive." But as far as IGI is concerned, the issue of public awareness largely rests with the broker community. "Personal accident insurance has to be sold to the public. We sell our business specifically to insurance agents and therefore the onus is on them to offer this type of contract to their clients."
Anthony Kidd Agencies, which has been transacting personal accident business since 1974, believe that many private individuals think "It will never happen to me,"and many brokers only pay it lip service when presenting to corporate accounts.
Anthony Kidd Agencies' managing director Robert Ayrton adds: "It appears in the broker's presentation but it is always on the list of `other things to discuss'. Brokers are more concerned with securing orders for liability, fire, physical damage and motor."
IGI's Searcy points out that it is difficult to sell personal accident as anything other than part of a portfolio of insurances and, according to Groupama's marketing manager Jamie Marchant, consumer awareness is the key reason why the market is undersold .
A second area for concern is getting the message about personal accident insurance clear. Some providers and observers believe there is considerable confusion among the insurance buying public. They find it hard to differente between the various insurances that sit under a broad health-related banner. Personal accident cover is often bolted on, or forms part of a more substantive permanent health insurance (PHI) package. The personal accident element offers benefits from week one rather than waiting for the PHI policy to kick in.
Both Anthony Kidd's Robert Ayrton and David Sterling, a director with Crispin Speers & Partners, which represents Lloyd's and other UK national insurers, say that consumer confusion is an issue, with people left wondering what it is that a personal accident actually covers.
Despite all this, Sterling, whose firm has been promoting personal accident insurance for the past 15 years, is happy with how the business is going. He comments: "Growth is running at around 30% against facilities, without marketing to the public and merely on our ability to service and quote efficiently with competitive terms through the 2,000 brokers that we have on our books in the UK." By comparison, Groupama reports sales growth running at around 15%.
Anthony Kidd Agencies is similarly optimistic about prospects for the market for personal accident, despite its status as an afterthought rather than a primary product. "Our long-term plan is to develop a wider portfolio of accident, and accident and sickness benefit whether it be individual or group," says Ayrton. He describes the claims experience as "acceptable" and says that while there are instances of attempted fraud, these are not as prevalent as with some other classes of insurance such as travel, which invariably includes a personal accident element.
However, happiness with the level of claims varies depending on who you speak to. "We generally find the claims experience is good," says Searcy of IGI Insurance. "But occasionally we insure a specific group of people that can cause big losses." He also says that fraud has to be constantly watched for. "Our vast experience teaches us what accidents will involve what length of time being absent from work. If we suspect something is amiss, then we will investigate further."
Sterling of Crispin Speers adds that, overall, insurers make a profit on the net premium, but that adjusting policies and handling the claims side is costly, as are the acquisition costs. He says that they have ambitious proposals to demonstrate its support for the class of business into the future. "We support the brokers and would be interested in investing in new programmes with them by providing the ability for them to underwrite internally with the software to make this and the policy production possible."