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Standardisation - when standards work, and when they don't

The calls for standardisation usually have obvious similarities: protecting consumers, saving money, and so on. Usually they fail to deliver in that promise, but occasionally there are solid examples of success, and even more rarely explosive examples of success.

Consider one standard piece of open-source technology which has been so successful it has been adopted to some extent by almost one in four people across the world (no, not Windows)

We're talking the English language.

You can now line up the Internet behind that, and electric wall sockets somewhere down the line.

Now, total permanent disablement insurance definitions may follow. According to the ABI, after extensive consultation with industry, there are moves to standardise the definitions for this simple core benefit.

A good argument against standards is that they can stifle competition. However, TPD is almost a single benefit, single state, insurance contract. It's like having a standard definition for 'dead' which to all intents and purposes we do - we only disagree around the margins, with things like causes. So why not life cover too? Well, it's because that is essentially settled that we just don't need to fiddle with it. Here is the telling statistical driver for TPD being selected for standardisation:

The ABI notes that in the UK, Total and Permanent Disablement accounts for only 3% of Critical Illness claims, but 55% of these claims are declined due to a lack of consumer understanding about when they are eligible to make a claim.

Wow, that bears repetition: 3% of claims but 55% are declined. Remember the Sovereign case last year where a man lost a leg but was shocked to discover this wasn't covered under his TPD benefit. It's that kind of misunderstanding and, frankly, failure in the industry, that we're trying to avoid.

Look here to see what the ABI has planned.

Hat tip: Mike Maloney.

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