The Truth About Statistics

Statistics Blog 2The Truth About Statistics

There’s a lot of cynicism about statistics and some of it is entirely understandable.  Whenever there is any sort of controversial debate both sides will inevitably trot out statistics to support their viewpoint.  Even the same set of statistics can be interpreted in different ways by different people.  Statistics, by their nature are generalizations, whereas we as humans often find it easier to grasp specific examples.  We can be told a fact about a certain percentage of the population, but it only becomes meaningful when we see people who put a human face to the statistic.  With that in mind, let’s look at some of the statistics about income protection in the UK and see what they really mean.

The size of the industry is massive compared to the size of the population

At December 2010 there were estimated to be just below 7 billion people in the world of whom around 61 million lived in the UK.  That means the UK is home to just below 1% of the world’s population but its insurance industry is the 3rd biggest in the world.  In 2012 the number of term, life, and other protection policies active in the UK was estimated to be around 29 million, and these have paid out almost £200 billion in claims and benefits.  Insurance companies employed over 300,000 people and paid over £10 billion more in taxes.

Insurance companies are more than twice as likely to pay out as people think

Many people may be pleasantly surprised when they come to make a claim on their insurance.  The public think that fewer than 40% of claims are successful whereas the reality is that over 90% are.  These claims cover everything from cars and homes to pets with over a £1 million a year being paid out on cats and dogs alone.  In terms of human health, 60% of successful income protection claims relate to disorders which would be outside the scope of critical illness cover.

You may have more control over your premiums than you think

A recent study found that a third of people who were without income protection insurance felt that it was too expensive for them.  This is in spite of the fact that 20% of people will be off work for more than three months for health reasons at some point in their lives.  While protecting against potential threats always comes second to being able to pay your bills in the here and now, there are simple ways to reduce the cost of income protection insurance.  Income protection insurers are increasingly moving to offer lower premiums to people who take care of themselves – and the savings made by moving to a healthier lifestyle (e.g. giving up smoking and reducing alcohol) can be put towards these premiums.

Young people can get sick too.

Children have an absolutely incredible ability to repair themselves after cuts and bruises, and even broken bones.  A small percentage of them, however, do get seriously ill.  Worryingly, 66% of families do not have a financial plan in place to manage a child’s illness if it meant they had to give up work to assist with their care.  Approximately two thirds of people with critical illness cover for themselves do know whether or not their policy also covers their children.  Many policies do actually provide some level of cover for minor children.  While this may be the healthiest period of a person’s life, young adults can be afflicted with critical illnesses and therefore their financial needs should ideally be assessed on the same basis as those of more mature years.

 

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