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How is overpaying related to product innovation?
What does it mean to overpay an insurance claim?
Insurers tend to have a reputation of holding on to every claim cent they can and only paying out when they absolutely have to – however it’s is more accurate to note that insurers pay out a lot of money to policy holders. Even overpaying when it is more affordable to do so.
This may seem like a nonsensical statement but when the cost of investigating the claim – assessments, agent time spent on research, etc. – exceeds the cost of paying out the total amount of the benefit it is better for the bottom line to simply pay out.
There are also the occasions when it is simply the right thing to do – such as when early intervention is vital.
Are there issues with overpaying on claims?
Yes. While it is a good day for the claimant when their pay out exceeds the costs of their loss, there are ramifications for the insurer and an equity issue for other claimants.
While it may be more cost effective to pay the benefit when it should technically be lower, overpaying repeatedly is not a good thing for any business.
Furthermore, it can cause an equity issue for other clients of the insurance firm. They may have received only just enough to cover their costs while someone else receives “extra” simply because they healed faster or caught a break on treatment costs.
How does this lead to product innovation?
When overpaying is justified by therapeutic needs it is easy to see how and why it happened. However, while this type of paying out is fairly common practice it is not standard practice and this can lead to unfairness to other claimants.
Plainly speaking, paying out over the benefit named in the policy is common but simply because it is not reflected in the wording means that not everyone can expect an equal pay out.
While the guidance for advisors is that policy documents are a minimum and there will be cases where insurers will be happy to pay out more or add therapeutic inclusions where it would be worth it for everyone involved – you cannot rely on precedent.
The policy has, and always will have, the final say in the matter. No one should rely on the insurer agreeing to pay more or include therapeutic benefits on good faith. Any benefit to be relied upon needs to be included in the print.
Making sure your policy wording is far and clear is a vital part of providing good services to your clients.