View more on these topics

Richard Verdin on Protection

It has been quite a while since I read an insurance company&#39s terms of business agreement but, as one landed on a desk near me recently, I thought I would read it to try to understand why changes were needed to the previous agreement. It turned out that the changes were necessary to accommodate ebusiness, particularly the use of the provider&#39s eprotection application and underwriting tool. Here are some extracts that I have just read.

The intermediary shall ensure all data submitted is accurate to the best of the intermediary&#39s knowledge and has been gained through discussion with the client. It is the responsibility of the intermediary as agent of the client to ensure the client is aware of the need to inform the company immediately of any change in their health or circumstances before it assumes risk for all cover applied for.

The intermediary will indemnify the company against any loss sustained by the company arising from the provision of incorrect information or any loss suffered by the company as a result of any breach of the terms by the intermediary, its agents, employees or anyone to whom the intermediary grants authority access to the system.

Let us assume that in a few years time there is a critical-illness claim and it turns out that either the client&#39s circumstances changed as the case was being underwritten and he claims the adviser did not make him aware of his obligation to disclose relevant information after application or the client says he disclosed information which the adviser said was irrelevant. Now let us assume the insurer decides to pay the claim. What do its terms of business allow it to do? The contract is clear – it can recover the sum paid and any other expenses from the adviser.

The conditions actually seem quite reasonable to me. It is the adviser&#39s responsibility to give full advice to the client, including the importance of disclosing medical history and any previous or current diagnosis. The only contradiction is that insurers require advisers, who they see as the agents of their clients, to contract with them to compensate them for their losses for non-disclosure when they also require clients to sign a paper version of the online application before going on risk. Do insurers feel they cannot rely on applications signed by clients as evidence that they understand their obligations?

Not only do insurers want their cake, they want to supply the recipe and ingredients, dictate the measurements and cooking instructions, then inspect it before eating it. If they do not like the taste, they want you to pay all their costs and expenses incurred from start to finish.

From a business perspective, I do not have a problem with this and, if I was an insurer, I would do the same. It is simply that they have thought through the implications of the electronic age and are preparing themselves for it. It is time for you to do the same. Assuming you conduct business properly and professionally, it is sensible to provide yourself with the protection you need from the possibility that clients might have selective amnesia in future.

In this electronic age, you must record every conversation with every client and every insurer. You must date every recording, log it and store it for easy retrieval. If you employ staff to key this data for you, you must monitor this. It is the only way to protect yourself.

Richard Verdin is sales and marketing director at Direct Life & Pensions


&#39Third of advisers will be wiped out by EU&#39

A third of adviser firms will be forced to close in January next year because of professional indemnity requirements imposed by the European Union. IFA Thomson&#39s Group chief executive Douglas Gardner, a member of the FSA&#39s practitioner panel, speaking at the London Professionals dinner last week, said he believes that the combined imp-act of impending […]

Product matters

The introduction of CPPI to funds is slowly taking off as providers look for a modern version of with-profits. Friends Provident is the latest provider to launch a fund using this protection tool through its Stewardship fund. This fund is available through its investment bond wrapper and offers investors exposure to the Stewardship fund while […]

90% of loan advisers to carry on after M-Day

Mortgage advisers say they feel comfortable about regulation, with 90 per cent of introducers confident that they will continue to offer advice after October, according to research from Imla. The survey also found that intermediaries think more than half of their customers are not familiar with key mortgage issues. Intermediaries say their customers could not […]

A&C wants its views heard

Aitchison & Colegrave director Brian Aitchison admits he was surprised by B&B&#39s announcement that it intends to sell off its subsidiary IFAs. He says he hopes B&B will find a buyer which will mesh with A&C&#39s plans for growth and not just sell to the first company that shows up with an offer. Aitchison says […]

Changes to early exit pension charges

In November last year, the FCA announced that from 31 March 2017, early exit pension charges will be capped at 1% for those customers who are eligible to access their retirement savings from age of 55. The rules also state that for new personal pension plans started after that date, or on new increments into […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm