Brokers warn their clients are being put at risk from call centre sales teams poaching their life insurance customers and rebroking cheaper policies with less cover.
Intermediaries add that these substitute policies often cover fewer illnesses, are not understood by customers and can have features that cannot be claimed on.
Four brokers have told Money Marketing sister title Mortgage Strategy that they have had clients cold-called in this way since December 2016.
London Money and MOV8 Financial both tell Mortgage Strategy that their life insurance clients have been contacted by the Financial Assessment Centre and The Review Bureau, both based in the same Swansea office.
TRB is an appointed representative of Hayden Williams Independent Financial Services and FAC is a trading name of Andrew Robert Collier, also a Hayden Williams AR.
Brokers say affected clients are encouraged to move to cheaper Legal & General policies. Mortgage Strategy is unaware of other lenders being involved.
Clients believe they are speaking directly to L&G, not a third party.
London Money mortgage & protection consultant Cathy Beaumont says in March FAC persuaded her client to rebroke their existing L&G policy with another from the same lender and save £3 a month.
However, Beaumont says the new policy was sold to the client on the basis of being cheaper but also had reduced cover, potentially leaving the client at risk.
FAC also told the client their new policy had a feature that meant they would not have to pay inheritance tax. However, the customer was not eligible to pay this as a first-time buyer with an estate worth less than £325,000.
Beaumont says: “One, they’ve cold-called the client. Two, they’ve potentially put them at risk.
Three, they’re selling them something they didn’t need in the first place and that my clients didn’t understand what they were talking about.”
MOV8 Financial director Robin Purdie said he lost two life insurance clients to TRC when they offered cheaper L&G policies.
Coincidentally, Purdie adds TRC also cold-called him with the same offer as a life insurance customer.
On the call, Purdie says he “clearly stated” he had a good policy that included critical illness cover, but that the TRC caller “plowed on on the basis of cost and nothing more”.
Purdie says: “When we are discussing protection with a client and they have critical illness cover already in place, that’s not to say we won’t recommend a replacement, but we will do a strenuous analysis of the conditions.”
Purdie adds that clients could lose out from the different policies, and that MOV8 has had commission clawed back due to the rebroking.
He says: “As galling as it is that these companies are actually doing this and what it means for us as advisers, that we potentially lose a bit of remuneration, or worse than that, lose the clients going forward, it’s the potential implication for the client.”
Purdie said it was “potentially catastrophic” that no one from the ARs asked him or his clients about their medical conditions before recommending critical illness cover, as clients could be buying unsuitable policies.
Mortgage Advice Bureau mortgage & protection adviser Daniel Clayton says he has also had clients approached by a call centre that were encouraged to rebroke onto L&G policies that covered fewer illnesses.
He said one client went from a policy covering around 100 illnesses to “an inferior product”, one protecting from around 40.
He says: “We wouldn’t be able to do that, because you’d be recommending a policy you’d be less likely to be able to claim on. It’s frustrating.”
Monica Bradley Associates financial consultant Phil Leivesley says FAC has also contacted some of his clients and encouraged them to take out cheaper L&G policies in January.
He says: “There’s a very noisy office in the background, it’s a call centre. Frankly we were able to rescue the policies, though we never really got to the bottom of it.”
An L&G spokesman says Hayden Williams has an agency to write its protection business, and adds: “Hayden Williams IFS Ltd assumes full regulatory responsibility for any advice and operating procedures for TFAC or The Review Bureau.”
TRC says: “Our obligation as an appointed representative is to ensure that our engagement with clients comply with the treating customers fairly principle and to ensure that any transactions we facilitate are in the client’s best interest and meets the client’s demands and needs in accordance to the FCA’s Insurance: Conduct of Business Sourcebook.”
Hayden Williams declined to comment. FAC did not respond to requests for comment.