There is no such thing as a non-advised direct sale of protection insurance, according to Norwest Consultants principal Harry Katz.
Money Marketing reported recently that the Financial Ombudsman Service believes a nod could be construed as advice during the non-advised sale of a protection product. Katz says this confirms that non-advised sales do not exist unless they are execution-only.
Katz says: “If the customer collected a form from a shelf in the Post Office or a supermarket, filled it in by himself at home and posted it, that would be a non-advised sale.
“Any interface with another human being, whether on the phone or face to face, will probably be regarded as advice by the client and probably, in the event of a dispute, by the ombudsman.”
Hargreaves Lansdown head of protection research Jonathan Briggs says: “It is a grey area and there is a great deal of difference between execution-only and direct sales. Arguably, any situation where the consumer is swayed to buy a certain type of life insurance is a type of advice.”
Direct Life & Pensions sales and marketing director Richard Verdin says: “Clearly, there is such a thing as non-advice. Direct sellers provide premium quotes and factual information from the providers. Does this constitute advice?”
Legal & General pension strategy director Adrian Boulding is urging the FSA to focus any investigation into contracting out on IFAs and providers that targeted unusually high numbers of customers over the pivotal age.
Boulding says a pension review-style investigation of contracting-out would be an over-reaction after the FSA admitted in February that it had found no evidence of widespread misselling during its work so far.
The regulator, which is set to publish details of its findings early next year, says it has not yet investigated any firms. However, sales to people over the pivotal age could be one of the areas covered.
Boulding says internal investigations at L&G have found a low concentration of sales above the pivotal age.
But Money Marketing understands the FSA believes between 200,000-250,000 people above the pivotal age contracted out between 1987/88 and 1996/97, creating a potential compensation bill of almost £3bn.
Boulding says: “I think the FSA will find pockets of IFAs and providers with an unusually high concentration of sales above the pivotal age. This is what it will specifically be interested in. But I do not think it will find evidence of consistent misselling across the industry.”
Informed Choice director Martin Bamford says: “Using sales above the pivotal age would probably be a good starting point for a review as long as other factors are taken into account, such as attitude to risk, whether the customer wanted to retire early and take tax-free cash and flexibility.”
Association of British Insurers spokesman Jonathan French says: “We agree that there is no need for a full-scale investigation. Focusing on pivotal ages may well be a sensible way forward but there may be many others.”