View more on these topics

Will your online process protect you from trial?

In the past two to three years, many life companies have invested huge amounts of money and time building the technology and infrastructure for a fully automated end-to-end process for the acceptance of protection business. This has been a big win for IFAs who enhance business by writing more of their cases online with immediate acceptance.

The cost benefits for insurers and IFAs have been reflected in reduced premiums and a simple, straightforward experience for the customer. Many advisers cite the online application capability as a crucial element in the ongoing development of their business model and a vital part of the sustainability of the product.

Earlier this year, there was a highly publicised decision by the Financial Ombudsman, where a complaint was upheld on the basis that the applicant did not have the opportunity to reflect on the application questions and responses prior to the case going in force. This ruling sent shockwaves through the industry and could have serious ramifications for the viability of the online process.

A recent communication from the ABI to members indicated that: “Where insurers obtain a signature, their position is likely to be stronger from an evidential perspective when this is obtained on a document which incorporates the applicant’s questions and answers, as opposed to a separate declaration. Where a signed confirmation schedule is not received, the response may well be to terminate cover.”

The concern now is will your online process provide you with a sufficient evidence trail to ensure that you can successfully dispute non-payment of claims on the grounds of non-disclosure?

It is clear that the extra security is vital to protect the interests of all parties, end-consumer, adviser and life office but it could mean delays in the business being accepted.

Advisers could also be disadvantaged as they will have potentially to get a wet signature on the health declaration, while those customers buying direct from insurers will not be subject to the same rules and will be able to apply online and get acceptance there and then, subject to underwriting.

Some advisers may cease to transact business online and revert to completing paper applications. This could add to their costs as well as introduce delays in getting business accepted. The cost reductions that come from full online processes benefiting adviser and life office may also be reduced. In the long term, the rates that are charged to a customer may be affected as providers struggle to maintain costs.

Those companies who offer the new teleunderwriting service which is set to become the dominant way for advisers to place protection business, are less at risk. As the recording of the call with the customer is part of the evidence trail a signature is not required, as long as a policy schedule is sent to the customer.

Prudential’s process of retaining the recording of the call for 10 years and retaining the schedule for longer than the term is the right evidence trail to use in the event of any complications with claims later on.

The decision of whether an insurer is prepared to take on the individual risk associated with an incomplete evidence trail is one for the individual company. There is split opinion in the market with some companies adopting a signature and others not.

Clearly, there will be a resistance to inserting a signature into a paperless process but it may be a case of better safe than sorry.

Recommended

NU chief points to value of actuary training

Qualifying as an actuary prov-ided valuable insights into bringing investment products to market for Norwich Union head of investments product development Neil Davies. Davies joined NU’s actuarial graduate scheme in 1990, with the early part of his career placing emphasis on professional exams. He benefited from secondments to valuation and special quotations departments as well […]

Bolton Wanderers

Fidelity has given investors and advisers returning from their summer holidays a lot to think about by announcing it is to split Anthony Bolton’s giant special situations fund next year.

Small-cap manager quits firm

US small-cap manager Rob- ert Graham Brown has left Threadneedle. Brown joined the company as a graduate trainee in 2001 and he has been managing the American smaller com- panies growth fund since early 2004. Threadneedle says it plans to recruit a replacement for Brown as soon as possible. The firm has appointed Samuel Morley […]

The Downsizing Delusion: Why relying exclusively on your home to fund your retirement may end in tears

By Steve Webb, director of policy The British obsession with homeownership can have dangerous consequences. A recent survey by Barings¹ found that up to three million people of working age were planning to rely wholly on the value of their home to fund their retirement. We are not talking about people investing in buy-to-let or […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment