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Magic numbers

Good news for the protection industry for once. After a slew of bad press in recent weeks, notably on Watchdog and in Which?, critical illness insurance came up trumps in the Financial Ombudsman Service’s annual review with a drop in the number of complaints received about the product.

The number 119 may not sound much but this represents a fall of 15 per cent in comparison with the number of complaints received in the financial year 2005/06.

Income protection insurance similarly saw a drop of almost 20 per cent in the complaints received from customers which means the industry must be doing something right.

The figures fell from 1,103 in 2005/06 to 891 in 2006/07 for income protection and from 799 to 680 for critical illness.

Lifesearch head of protection strategy Kevin Carr puts the improvement in the complaint rate down to the industry’s moves to improve clarity, rules and information and believes this is beginning to filter through to customers.

Private medical insurance stayed level with 388 cases recorded but the volume of complaints surrounding loan protection insurance including payment protection insurance increased from 1,315 up to 1,832.

But behind the headline figures, there is perhaps a more interesting story.

In the review, the FOS says it is pleased to note that the number of complaints have reduced on protection insurance products because previously there has been a “steady pattern of year-on-year growth” in the number of cases received.

It goes on to say: “Disputes relating to health insurance involve some of the most distressing and complex cases we deal with. Assessing the relative disability of an individual – or the accuracy of medical information given in the past by someone who is now critically ill, dying and or bereaved – is challenging and stressful for everyone involved.

“Our work in achieving a fair outcome in cases such as these is hindered by the clear injustice of the law in relation to “non-disclosure” in consumer insurance-contracts.”

Two hundred. There is another figure for you.

According to the report, the law on non-disclosure was developed over two centuries ago and the FOS agrees with the general view in the industry – that it is high time for the law to be updated.

But FOS warns that although it is working with the Law Commission in this area, actual reform is not to be expected for a few years yet. In the meantime, however, the ombudsman notes that together with the insurance industry it has developed a more favourable approach to non-disclosure for customers and praises the insurance industry for adopting a position that “differs significantly from the strict legal position”.

There is, as ever, a ‘but’ in all of this.

The report says: “However, 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.”

The FOS says that those advising on and selling protection policies are in many cases confused or poorly trained and, as a result, they only contribute to the misunderstandings of the consumer.

It goes on to call the application process for CI and IP an exam or memory test, with the results only revealed if the consumer makes a claim.

It concludes: “Cases such as this continue to provide a regular source of damaging publicity that undermines public trust and confidence in insurance products generally.”

So, the overriding message for the protection industry from the FOS is “must try harder” despite the encouraging figures and non-disclosure continues to be the main issue then.

As the FOS says, action from the Law Commission is unlikely to occur for a few years, so what should be done in the meantime to tackle the non-disclosure problem?

Answers on the back of a claim form please.

And just a quick note to say that for those of you that don’t know, this is my last week on the protection beat because as of next Monday I shall be taking over the pensions patch.

But please keep in touch – especially if any pensions stories crop up in the future.


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