Online cover is a recipe for disaster

10 December 2009

In the future, we can expect a mountain of claims declined due to non-disclosure.

The policies will be sold through online providers and supermarkets which cut out advisers, except the policies won’t have been “sold” but will have been “bought” and the unlucky policyholders who bought them will have no comeback.

All the industry will be tarred with the same brush. Financial Ombudsman Service fees will go up to pay for the caseload and the consumerists will have a field day. What leads me to this conclusion? Human nature.

Last week, I was approached by a lady who had never dealt with us before. Her critical-illness claim had been declined due to non-disclosure. The policy had been bought through a supermarket with no IFA involvement.

She had answered no to a number of questions that should have been answered yes because, in her words, “It way years ago and anyway I thought it was none of her business.”

Result - no payout. She wanted us to help her put together an ombudsman claim against the insurer concerned. Helpful though I normally am, for once, I declined to get involved.

Maybe my lack of charity was down to the fact that, when I asked why she had not used an IFA to write the cover correctly in the first place, she replied: “I wanted it cheap.”

This is ironic, as we have never been beaten on price by a supermarket and we have never had a claim refused either.

Cover is best done face to face by an adviser who cares about the client, not by phone or online with operators who are here today and gone tomorrow. We go to great lengths to impress on clients the importance of full and honest disclosure and we get information out of clients that would not be given online.

Recently, unusually for us, we wrote some life and critical-illness cover on minimal commission and an execution-only basis. Having done a mortgage for no fee (we won’t be doing that again) on the expectation that we would get the life cover, the client suddenly found online prices too tempting.

Rather than lose it totally, we agreed to match the website price on an execution-only basis with no advice whatsoever, which we explained and she agreed.

Despite wanting a rock-bottom price at outset though and accepting that advice was not included, lo and behold, the proposal form comes back with a covering letter wanting some free advice about a trust. To make matters worse, the letter also revealed matters not disclosed on the proposal which should have been.

Not wanting this customer to lose out, we have corrected the non-disclosure with the provider but that would not have happened if she had done it online.

Neil Liversidge
Managing director,
West Riding Personal Financial Solutions

 

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