I have copied some text below from the Financial Ombudsman Service Annual Review 2006/07 which I believe everyone who advises on protection as well as those who manage or are in some way responsible for advisers, networks or other such businesses should read.”…on the basis of the disputes we see, we remain concerned that what some insurers require consumers to disclose about their health is probably beyond many people’s capability and comprehension – especially in the context of a sales process that is hardly conducive to the serious consideration of complex questions about medical history.””…those advising on and selling health policies are in many cases confused or poorly trained, and only contribute to the misunderstandings.”
The concerns expressed in the document emphasise and add weight to what my own company has been telling advisers and business managers for the last five years. To be fair, many have listened and acted. However, just as many have argued that a change to the process of adviser and customer filling out forms together or customers being left to try to complete the long and overcomplicated forms on their own is somehow OK. Well it isn’t, and right now customers are suffering and insurers’ brands and reputations are being tarnished in the broadsheets, in the Sunday papers and on TV.
For policies that were put in place before 2005, the issue is one of customer versus insurer, because under the Association of british Insurers’ code of conduct insurers accepted responsibility for the sales process. However, for cases sold since then, the situation is very different.
Let me now add comments from two others, one made by an insurer and one by a reinsurer.
The Insurer: “We sometimes find when a claim is rejected due to non-disclosure that the customer accuses their adviser of omitting important medical facts from the application form, facts the customer says were disclosed to the adviser.”
The Reinsurer: “We often decline claims and the policyholder says that the adviser told them it was OK not to disclose information.”
It seems that when faced with the prospect of a claim not being paid, some customers are prepared to point the finger at those who advised them at the application stage.
If, for a sale made under statutory regulation, a decision to decline a claim by an insurer for non-disclosure is upheld, the issue will come down to a straight dispute between the adviser and customer.
If the insurer pays the claim, it is possible that a dispute could arise between adviser and insurer.
Either way, the experience will be difficult and expensive for all involved and it would be far better for the adviser to heed the words of the FOS and avoid having to deal with underwriting issues during, what is after all, a sales process.
The outdated practices still employed by many advisers are deeply ingrained. Perhaps, once a few advisers have been forced to pay off customers’ mortgages, then attitudes will change.
Richard Verdin is sales & marketing director at Direct Life & Pension Services.