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Questions are answer

Internet sellers should adopt new methods to stop misleading consumers

Those of us who seek to get internet sellers of protection to stop routinely misleading consumers need to make sure that we do not add to the spring tide of rules and regulations.

Trade bodies cannot enforce proper behaviour, only the regulator can bring reform. We need advocates of change to show the FSA how they can achieve consumer protection without more rules.

Warnings were once a bright idea but their proliferation is perhaps self-defeating, although, in practice, those venturing into new markets do tend to read simple clear warnings even if on later trips they regard these as a waste of time.

Of course, the longer a warning is the less effective it is. This has been turned into an art from on the internet, where one is routinely given pages of US-style disclaimer to accept before moving on. These are provided in the full knowledge that, almost without exception, the customer will tick the box without reading them.

It seems sensible to ask the internet sellers of commoditised protection products (that can cause huge detriment to those that buy them wrongly) to agree to adopt a new methodology of getting consumers to make good decisions as opposed to just seeking to profit from man’s natural desire to keep things simple and quick.

They could achieve this by asking non advised buyers a few direct questions as part of the application process. After all, we ask lots of questions designed to reduce our underwriting risk, so it seems fair that we ask some aimed at protecting our customers against the proven risk of them buying the wrong stuff.

The best protection against this is to take advice but that has been said too often to have meaning. We should do away with internet warnings and endless pages of bogus half-true information and simply ask a series of pertinent questions.

Responsible sellers of non-advised protection products should, after asking for a name and address, ask customers: “Are you aware that buying without advice loses you key elements of the ombudsman’s protection?”

I bet a large number of buyers would take note of that question and say:”yes,” before moving on down the form. But those that it does cause concern and who tick “no” should then be diverted to a clear, brief explanatory piece which explains the position and the alternatives properly. Thus, they get treated fairly on a point that is not immediately obvious to any layman.

It needs no more than, say, six such questions to stop the routine consumer detriment. Another could be: “You are about to purchase lump sum protection. Many advisers feel there is a lower-cost way of protecting young families on a tight budget. Would you like to know more?”

A “no” keeps one on the application process, a “yes” takes one to the explanation.

The issues facing any buyer of protection as to whether pension term assurance, income protection and PPI are what they need can easily be resolved in this way, and the non-advisers’ oft-made claims – that they only sell to those who already know what they want and that the customer knows their stuff – can be proven to be true.

At the moment, it is clearly self-serving tripe – more than 70 per cent of customers change something major about their protection purchase decision when advised, so that will be the proportion to which non- advisers are causing detriment.

Tom Baigrie is joint managing director of Baigrie Davies

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