View more on these topics

Richard Verdin on protection

As we look ahead to the regulation of non-investment pure protection products, what has the practitioner got to fear, if anything?

I am sure the majority of IFAs who have been in the industry for five years or more will have at some point treated simple term products as if they were regulated. This is because providers categorised the products as regulated to adhere to Lautro rules. These rules were later adopted by the PIA for providers. Fimbra, on the other hand, did not treat term as a regulated product and the PIA adopted its rules for IFAs. This inevitably resulted in confusion and, as a result, most IFAs opted for the safer option.

A few years ago, a small number of providers applied for a rule waiver and the whole non-regulated phenomena was born. Now the rules are changing again, so a little looking forward and back may not be a bad thing.

I have heard some people say they have nothing to fear as long as they do things properly and give good advice. My response is to go and tell that to the mortgage and investment advisers who, to the best of their knowledge, training and experience, were doing things properly and giving good advice right up until the economy changed course and the ombudsman applied a different set of rules to the ones they thought they were playing by.

Today, businesses are springing up from nowhere to pursue every possible prospect of a complaint and extremely well-paid consumerists are queuing up to present one-sided retrospectives. I think it pays to be cautious and a bit of a sceptic.

Where are the pitfalls for advisers? The following are some potential accusations that might be made by clients. However, they can all be guarded against. The point is to make sure that you do.

•”You didn&#39t sell me enough critical illness to cover all my financial needs. Why not?” •”My children and I cannot live on the amount of life insurance you sold my husband. When he moved jobs, his death-in-service cover was lost. Why didn&#39t you advise us to review our cover if he ever changed jobs?” •”My husband died of a heart attack on his way to the hospital. Why didn&#39t you include life cover as part of his critical-illness policy? My new adviser says you should have and, in fact, it would have been cheaper.”

•”My payment protection insurer will not pay my mortgage because of what it calls a pre-existing condition. I don&#39t remember you pointing out what that meant when you arranged the mortgage.”

•”Why did you sell me a critical-illness policy at £60 a month when there were others available through you at £45 a month?” •”Why did you sell me a critical-illness policy from XYZ Company? I have now got aplastic anaemia and, for a few more pounds a month, ABC Company would have covered me for it and paid out the £100,000.”

I am sure you can think of many more. The moral is be aware, be thorough in the extreme and record everything. I can see the adverts now: “No win, no fee. Have you been sold a critical-illness policy in the last 10 years? If so, you are probably owned compensation.”

Of course, regulation always throws up anomalies. An example is the 10/70 rule for term insurance where, unless you are authorised to sell investment products, you may not advise a client to take out a policy of 10 years or more, when the policy extends beyond the customer&#39s 70th birthday. At first glance, you might say it is not such a bad rule, it is simply an additional layer that protects older people. However, if this is the intention, it is badly worded, because you can sell a nine-year policy to a 68-year-old (to age 77) but you cannot sell a 10-year policy to a 61-year old (to age 71), when the customer is younger both when they take the advice and when the policy finishes.

If you are going to sell pure protection in 2005, be prepared, be very prepared.

Richard Verdin is sales & marketing director of Direct Life & Pensions

Recommended

Lifeboat looks for a rescue

It is never good to see a business falter or fail. Lifeboat Financial Group, the Telford group of IFAs and brokers has gone into administration. The news will no doubt send a few shivers across the marketplace. Presumably, the management of some medium or large adviser companies out there know that they are close to […]

BM bids for adverse remortgage business

BM Solutions is introducing a new remortgage package across its entire adv- erse product range. The firm hopes to encourage adverse customers to remortgage away from expensive deals, and is offering free legal services and £250 cashback All products in the range have no overhanging charges. The range includes a tracker mortgage at Bank of […]

L&G ends Network Data deal

A row between Legal & General and Network Data has led to L&G ending its business relationship with the mortgage network. L&G says it is no longer dealing with Network Data because of the low quality of business it says the network has been submitting. But Network Data says the termination of the rel-ationship is […]

Bradford & Bingley to axe MarketPlace

Bradford & Bingley is scrapping IFA brand The MarketPlace as part of its strategic review. Chief executive Steven Crawshaw said in May that B&B would no longer offer a whole-of-market proposition as it was not worth the cost or the logistical problems and MarketPlace advisers would be moved to a multi-tie offering. Doubts have been […]

Scheme pays explained

By Fiona Hanrahan, senior product insight and technical support analyst We’ve received lots of queries on scheme pays and when it can be used. This article explains how it works and the conditions which apply. What is ‘scheme pays’? If an individual exceeds the annual allowance (AA) and an AA tax charge is due, they […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    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

    Email: customerservices@moneymarketing.com