Le Beau warns of CI misselling
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The protection industry is heading for a misselling scandal over cases where critical-illness policies were sold instead of income protection, according to Le Beau Visage managing director Peter Le Beau.
In June, the FSA published a review which found that consumer understanding of CI is poor and firms selling CI over the phone are not meeting oral disclosure rules. The FSA published its findings in its RDR consultation paper on professionalism, also in June.
Speaking at the Medicals Direct Panorama conference in Dorking last week, Le Beau said: “There is going to be an issue about CI. If you read the last RDR paper, there is concern over the misselling of CI when income protection should have been sold. This will become more and more of an issue.
“The FSA is concerned that for years people have been sold critical-illness cover because it is an easier sale and advisers perceive it to pay more commission when IP was the more appropriate product.”
HSBC head of life and protection Dennis Smith said that the way product providers compete on CI needs rethinking.
He said: “As an industry, we are barking mad to effectively proliferate with this list of so many different CI conditions when we know there are only a few conditions such as heart attack, stroke and cancer that customers should really be worried about.
“But we have this intermediated model that makes it very difficult for us to step back from that. It is suffocating the industry and innovation as a result.”
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Readers' comments (14)
pete wildebeast | 19 Nov 2010 9:17 am
I think every product provider agrees with Mr Smith about how daft it is adding loads of rare illnesses.....
But Pru do recently. Then Bupa.
Everyone plays the game because they know that they won't get sold unless they keep adding.
And Defacto make things worse by encouraging providers to add illnesses for points.....
Points make prizes.........
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GEORGE GRANT | 19 Nov 2010 9:24 am
When is all this misselling going to end. They keep coming with new scandals. Why don't they leave advisers alone and let them get on with the job and hit some other industry. I have been an adviser for over 35 years and never had one complaint. Gert rid of the greedy advisers and let the passion advisers get on with the job they have done with great pleasure.
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Mark Babyfeelgood | 19 Nov 2010 9:28 am
How will they prove this/
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Julian Stevens | 19 Nov 2010 9:37 am
If any seller fails to explain to customers in the clearest terms possible ~ and, of course, confirm that explanation in writing ~ the difference between CI and IP, then they risk a complaint. Remember always that most complaints are predicated on the claim that if I'd been told XXX then I wouldn't have bought into the product. Provided you can prove that you did in fact tell the client XXX, then you should be safe.
Though it would be unavoidably pricey, perhaps providers should think about designing a combined IP and CI protection product with a much simplified list of CI conditions.
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Anonymous | 19 Nov 2010 9:51 am
Here we go again with the next "misselling scandal". What about the misregulation scandals with the FSA then.?
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Peter Turner | 19 Nov 2010 9:54 am
The problem is that the lump sum from CI makes it a "sexy" product whereas PHI with its steady plodding payout is boring.
It is the Hare and the Tortoise.
On the whole, I would rather defend a complaint that PHI had been sold in preference to CI than the other way around.
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Bob Donaldson | 19 Nov 2010 9:54 am
Whilst I accept Mr Le Beau's view, and he is right we are advisors not order takers, however, the public too often do not perceive that they are going to be off work long term and that a capital sum is no substitute for loss of income *unless it is really substantial'.
It is the old chestnut that protection has to be sold it is rarely bought in the correct manner.
However, tell someone that when you arrange an income protection and they have a crtical illness and the IP policy does not clear their mortgage. They will come after you with a a claim still believing they had crtical illness or their mate down the road has such and says you should sue your advisor.
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Anonymous | 19 Nov 2010 10:22 am
Both policies are equally important but it is the client who makes the final decision as I see commission has little to do with it. I potentially see IPP as causing greater issues for misselling. A clients ability to claim against an IPP's are often restricted at the time of claim if the policy hasnt been regularly reviewed, such as change of income, employment/self employed status etc.
Over many years I have seen far more clients succesfully claim against a crit policy than IPP's.
When are these blame and claim merchants going to live in the real World!
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Anthony Walker | 19 Nov 2010 10:35 am
Why dont brokers and advisors be liable for all mis selling includng pet insurance and then my dog can put a claim against me for not insuring her properly
If certain people had their way there would be nobody insured and our bankrupt country would have to pay out .This now is getting beyond a joke
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Steve Laird | 19 Nov 2010 10:38 am
Surely it's a question of the client's priorities? If I suffer a heart attack then CI will be much more useful in the short term than PHI. Equally if I have an accident the reverse may well be true.
Give the complexity of most CI policies the idea of them being sold other than face-to-face is worrying indeed. In these litigious days providers must be scared that people will complain that their 1 in a million condition should have been covered. Maybe it's time for a stakeholder CI policy covering heart attack, stroke and cancer with standard definitions of each?
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