Yes, many times I've heard that phrase. The best thing to say is something along the lines of, "Well, I specialize in making GOOD pictures of people. You've probably just never been photographed by anybody who really knows what he's doing behind the camera." You need to create instant confidence in your subject, in YOUR ability to photograph them.
This statement, the "I hate having my picture taken," is a pretty important tip-off to the subjects own lack of confidence in his or her own appearance, and is something you need to overcome. It is what is known as an obvious "tell". If a person leads with that, you know that they need reassurance, both in YOUR ability to shoot, and in the way they are looking. I've photographed literally, thousands of people. When a person comes into the studio and tells you, "I hate having my picture taken," many times they have some type of real or imagined 'issue', such as bad teeth, or a lazy eye, or they are habitual "blinkers", or are overweight, or have thinning hair, or what have you. You need to be READY for this type of objection; it's a type of sales interaction...you need to remove the "objection" they have by demonstrating confidence, and projecting skill and knowledge in how to make them look good, or at least look the best that they can be made to look!
A lot of older ladies used to ask for, "The special filter,", usually some type of diffusion/soft focus filter, indicating that they were worried about wrinkles. So--talk about using "beauty lighting techniques", and use very SOFT, mostly on-axis light, which minimizes wrinkles.
People with bad teeth...work "serious" and "contemplative" poses...don't ask for big smiles.