A leaked consultation paper from the Association of British Insurers on telephone and online applications for protection insurance has been criticised for ignoring the issue of customer signatures.
The paper, which follows draft guidance published in October, says the issue of customer signatures falls outside the scope of the consultation because it is “a business risk”.
But Andy Milburn, IFA market manager at Progress from Royal Liver, says the most important aspect of tele-underwriting best practice is customer signatures and describing the issue as a business risk is not acceptable.
He believes the ABI should make it best practice for providers to put customers on risk immediately and then give them three months to return their application with a signature confirming the information is correct and nothing is missing.
He states: “By adopting this approach it doesn’t stop the case going on risk, advisers getting commission or providers claiming premiums by direct debit. We see over 90% of applications returned within a month.”
More positively, the paper makes a distinction between tele-interviewing and tele-underwriting, describing the former as a “data gathering exercise” and the latter as “the process of interviewing a customer in order to gather risk-related information and to make a judgment on the level of coverage and premium that needs to be charged to cover the risk”.
The paper also suggests firms could make the consequences of non-disclosure clear by including a warning, which states: “You must tell us the truth. If you do not tell us the truth we might not pay.”
If applications are completed by an intermediary rather than the customer, the ABI says insurers should be aware the application has risks which exist whether or not they are signed by the customer.
Intermediaries are required to have “a clear audit trail” and should confirm the customer has checked their answers and understands their duty to disclose.
For advisers using laptops, the ABI says they could consider using pop-ups to re-enforce the consequences of non-disclosure, while in a telephone application process the conversation could repeat appropriate warnings where necessary.
It adds: “The final version of all disclosures provided should be sent out at the time the policy goes into force with a reminder to the customer that the information shown is the basis upon which they have been underwritten. At this stage the customer should again be reminded of the implications of failure to correctly disclose all facts identified by the insurer.”
The ABI is inviting comments on the paper by 25th May, after which it will revise its draft guidance and publish a final version.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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