Information technology has revolutionised the way that business is carried out all over the world but how has it changed the way that protection IFAs do business with their clients and are advisers happy with the new online environment they find themselves operating within?Some IFAs are rubbing their hands together with glee at the thought of faster, cleverer and shinier technology and have changed the way they work to take advantage of it but others warn that more work is being heaped on them by product prov-iders and fear that they may be shouldering more of the risk burden.
Life Policies Direct managing director Jason King says the changes are dramatic, with online systems taking out laborious, repetitive tasks, such as rekeying client data, while also reducing errors and freeing advisers to deal with clients.
King says a straightforward policy can be processed in around 20 minutes from the moment a client rings to getting them on risk, all without meeting the client, completing any paperwork and even without a signature in clean proposals. Companies such as Legal & General, Royal Liver, Liverpool Victoria and Friends Provident will all process business without a written signature in straightforward cases. In advanced systems, like the one used by Friends Provident, he says around six out of 10 cases can be dealt with by the system.
Former IFA Brian Lentz, who is now a healthcare provision consultant, says difficulties happen when a client has any problem that is not part of the drop-down menus included in systems.
He says: “L&G’s system was so frustrating that I hated using it. It required you to follow their idea of what was wrong with the client, which might not have been what was wrong with the client.”
L&G says it is updating its online system to make it more flexible and is expected to begin rolling it out towards the end of this year.
Complaints from IFAs about other systems include paper applications that do not match up with the online forms and systems with online underwriting that you cannot opt out of.
Lentz says he prefers systems such as Liverpool Victoria’s where it was possible to write in what the client told you in free text boxes rather than being funnelled down a set of predetermined options but the problem is that no system can process free text.
He says: “People are complex, situations are complex, you cannot simplify them by using an online system unless it allows for a free format.
“The set format does not allow for a correct description of the severity of a condition to be given. It is a lazy approach that is likely to lead to problems at the claim stage, as has been seen already.”
Lentz refers to a recent Financial Ombudsman Service ruling in which he says the ruling was in favour of a consumer on the basis that they had not seen a hard copy of the policy proposal and so the insurer could not claim material non-disclosure.
The FOS says this is not a case it has released into the public domain and declines to comment on it but it says that regardless of whether sales were made face to face or online, the same standards of process were expected and consideration had to be given to whether non-disclosure was deliberate or not.
King also believes there is an issue with non-disclosure and says there is uncertainty as to where the responsibility for problems may lie as it is relatively untested.
He believes there are ways around the problem, such as ensuring that clients are sent copies of documents to check and that advisers check their systems are robust as well as having trained staff and adequate professional indemnity cover.
Lifesearch senior technical adviser Kevin Carr wants more standardisation of the rules on signed proposal forms and non-disclosure,saying that two extremes currently exist in the market.
At one end, he says, is Scottish Equitable, where applications can be submitted electronically but the client cannot go on risk until a paper form has been sent out, checked by the client and signed. It does not provide any cover until the signed form is returned. ScotEq says it is considering an enhancing its system to make it capable of going on risk online.
At the other end is Liver-pool Victoria, which does not send out any paper documents for signatures, he says.
Carr says: “It is all a bit up in the air and we would really like standardisation on this from the FSA, ABI and ombudsman. The technology has developed rapidly and providers are trying to steal a march on each other.”
Friends Provident head of protection marketing Peter Hamilton believes that a signature in itself is not enough evidence that a client has really understood the need for complete disclosure or that they have been asked and understood all the application questions.
Hamilton says: “In reviewing a claim, the ombudsman will look to check that both the provider/intermediary and client have fulfilled all the requirements of the application/contract. Therefore, if a process is comprehensive, robust and well documented, a signature from the client at the bottom of the application form adds very little. Equally, a signature is little protection if there are potential flaws in the process.”
IFAs are also concerned over the fact that moving to online business means them doing the extra inputting work for little reward.
Lentz says: “Additional commission given to IFAs for spending the time filling in proposal forms is not commensurate with the actual time it takes. It is absolutely not worth it.”
King describes this as processing creep. “Slowly but surely, the providers have been cascading the responsibilities for the processing of protection down to advisers,” he says.
Product providers generally pay an uplift of 5 or 10 per cent in commission for using the online submission process,although this varies.
Norwich Union protection market manager Louise Pritchard says: “We want to encourage more and more IFAs to go online. To incentivise that, we have got to show a commission differential to encourage that usage,”Hamilton says after years of IFAs perceiving insurers as having low service standards, the aim of Friends’ online system is to “put control back in the hands of the IFA and the client”.
He adds: “We believe it dramatically speeds up the processing of new protection applications, cutting the paper chase from what can be days, weeks and sometimes months to a matter of minutes where no medical evidence is needed. It also enables IFAs to have complete end-to-end control online over their client’s applications.”
He says that some IFAs will never conduct such business online but those prepared to reconsider their processes were likely to “reap the greatest rewards”.