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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.


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