The protection industry is making huge strides in its efforts to tackle the issue of non-disclosure with new guidance issued in January by the Association of British Insurers. The ABI guidance covers fair treatment of claims for critical illness, income protection and other long-term protection contracts.
It includes both the omission and misrepresentation of important information and marks an important step in the industry’s drive to reduce the number of rejected claims and to improve consumer confidence.
The ABI’s sterling work is helping to lead to a drop in the number of rejected claims due to non-disclosure and the industry as a whole has moved on in the past five years.
The ABI guidance is of course not the first initiative in this crucial area – both the Financial Services Authority and the Financial Ombudsman Service have highlighted issues on non-disclosure. However there remains more to be done.
Tele-interviewing ‘making a major impact’
Lincoln Financial Group believes the adoption of tele-interviewing can make an important contribution to the protection industry’s ongoing commitment to improving consumer confidence.
Crucially tele-interviewing does not only deliver benefits for clients – it also delivers benefits for advisers by reducing the time they have to spend on applications while speeding up processing times and helping to reduce the risk of incorrect underwriting decisions.
Tele-interviewing is defined as the process of using a telephone interview as a means of collecting information from applicants for protection insurance regarding their occupation, medical history, pastimes and potentially hazardous pursuits.
The adoption of tele-interviewing by protection providers such as Lincoln Financial Group in partnership with MorganAsh, UK market leader in tele-interviewing, can deliver significant benefits for advisers.
Tom Baigrie, the managing director of LifeSearch, told MorganAsh recently: “We, as brokers, should not be taking the liability, or bearing the costs, for the medical interviews, and when product providers take control of the interviews, they can tune these to their underwriting philosophy and extend the interviews to collect all medical information, thus reducing GPRs and improving disclosure further. This has to be the better way.”
MorganAsh’s managing director Andrew Gething reports that his organisation has retained its record of ZERO contested claims to date now on over 30,000 interviews1. He concedes that the record of zero claims is unlikely to be maintained for ever, but it is undeniable that tele-interviewing is making a major impact on reducing the non-disclosure issue. He says: “Our strategy is not only to reduce non-disclosure but to make buying protection easier.”
Lincoln launches tele-interviewing
Lincoln Financial Group is launching tele-interviewing for its flexible menu-based protection product Financial Foundations following a successful pilot which delivered significant benefits to both financial advisers and their clients.
The new system goes live on 17 March and has been extensively tested since August last year. It is aimed at reducing processing turnaround times and further enhancing Lincoln’s reputation for excellent customer service.
Results from the pilot scheme showed a significant drop in non-disclosure2 compared with the old application form system. Significantly the pilot scheme showed that requests for further information from the client’s doctor were cut by almost two thirds compared with the previous system.
Clients were more willing to provide personal health details during the tele-interview than they would have in a face-to-face interview with an adviser. This saves significant amounts of time for advisers.
The greater level of disclosure meant that the risk of incorrect underwriting decision was reduced and the time taken to place the business was reduced. Just a small percentage of underwriting decisions following tele-interviewing differed from decisions taken after getting information from the client’s doctor.
Lincoln’s Financial Foundations is a specialist multi-benefit protection product, providing Whole of Life cover in one place under one wrapper including Income Protection and Critical Illness.
The menu also includes Elderly Care cover, a unique protection benefit which provides a lump sum on diagnosis of one of a range of specified illnesses normally associated with old age, but it is not designed or classed as a long-term care product as defined by the FSA.
Financial Foundations allows financial advisers to provide their clients with a flexible approach to protection planning; clients can add or remove from the product menu, amounts can be increased or decreased at any time with no additional administration charge (satisfactory health evidence may be required), premiums can be set up on a minimum or standard basis or single premium and cover plans can be pre-funded or targeted to last for a specific term.
It aims to provide complete lifetime flexibility and retention and can also offer clients a potential inheritance tax planning solution.
For more information on Financial Foundations visit www.lincoln-ifa.co.uk/ff or call our UK based consultants on 0845 071 0200.
1 Source: MorganAsh News Jan/Feb 2008.
2 Source: Lincoln Financial Group and based an extensive pilot scheme conducted over four months, from August to December 2007.
