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The Life Insurance Market
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Resolution, the company that owns the insurer Friend Provident, announced on 24th June that it has bought the majority of AXA's UK life assurance business (protection, corporate benefits and annuities). The deal will lead to the creation of one of the market’s largest providers in the corporate pensions and protection markets in the UK.
This means that the AXA UK life business will be acquired and held by Friends Provident, who will rename themselves Friends Life early next year.
The idea is that the integration of Friends Provident and AXA will deliver an enlarged group with a focus on profitable new business and key product areas, able to benefit from cost efficiencies while continuing to deliver high levels of service.
This deal will not alter any facet of the policies already held by existing Friends Provident or Axa clients.
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At LifeSearch we have noticed a very worrying trend in the insurance market recently and, as a valued customer, we wanted to warn you about it.
As a Critical Illness policyholder, you have the right, high-quality policy through LifeSearch. It will pay out if you are unfortunate enough to suffer from one of a whole range of critical illnesses such as heart attack, cancer, stroke or multiple sclerosis.
However, there are some companies who are selling another type of policy called Terminal Illness Benefit and passing it off as Critical Illness. It sounds similar but will only pay out if you have a terminal illness, which is a much less likely occurrence. You should also be aware that you already have Terminal Illness Benefit included in your policy anyway.
So if you speak to someone who believes they have the same policy as you, but are only covered for terminal illness, please make them aware that there are some companies out there who are profiting by confusing consumers about these two types of insurance. The policy YOU have is the right one and has been sold to you with regulated advice, but many other consumers are making mistakes through no fault of their own.
If you have any experienced any of these kinds of dubious sales tactics from other companies, please do comment below and tell us about it. Other consumers can read and benefit from your story!
Tom Baigrie, LifeSearch MD
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Posted by @
04:18 PM, June 18
I was interested to read your statement that "The policy YOU have is the right one and has been sold to you with regulated advice". How do you know that policyholders personal circumstances haven't changed?
I would also point out that the policy was written before life assurance sales were regulated!
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On May 13th, I wrote in this space of the shoddy sales tactics used by those who tell customers they don’t give financial advice but then use half-truths and selective information to close the sale.
These were uncovered by our sales retention team investigating a spate of churned policies. I have never before had such a sympathetic response to my opinions. Provider staff, IFAs, regulators and even ex-employees of the firms in question have all told me that they wish that these hard-sell excesses were properly controlled.
Several insurers have in turn made clear that they do not take business from sellers in this sector unless they are convinced that proper TCF disciplines are followed. But as one noted: “There always seems to be one last provider who will give them an agency in return for market share.”
This suggests that IFAs can easily require the provider partners who seek our protection business to demonstrate that they do not support retailers who do not TCF and that they are certain that their customers do not feel advised when they have officially had no advice.
Ethically, we should do this because our reputation cannot stand distinct from those who do more or less what we do in consumers’ eyes. We are tarred with the same brush except to those existing clients who know us to be trustworthy. Furthermore, the insurers we deal with are often dismissed as being only “interested in wriggling out of claims”. We know that is not true of our partners but if a policy was sold in unscrupulous fashion and the owner thinks its terminal illness benefit is a lowcost critical-Illness cover, they will feel betrayed when their cancer is diag-nosed. And their anger will not just be at the seller (whose name they will hardly remember anyway) but at all who arrange protection. We IFAs rely greatly on the ethical reputation of our wider markets.
Commercially, these sellers directly attack the IFA model. They employ unqualified, cheap staff who get only vestigial compliance, training and oversight and with boiler-room tactics and predatory pricing they undercut proper advisers, especially when they learn existing cover is in place.
Their sales tactics are hard and effective and they convert far more leads into sales than would any internet site at far lower overhead cost than any adviser. That simple business model is why these “pop-up” sellers are the fastest growing retail type. Of course, their tactics cause many customers to have later doubts and so indemnity commission clawback becomes a serious problem but that takes two years or more and in the interim, their rapid growth looks very impressive to prov-iders seeking market share.
There are many eventual losers in this. The biggest is, of course, the consumer who buys wrongly but the first affected are IFAs competing against competitors with an unsustainable business model based on predatory pricing.
So, if the ethical reputation of all retailers, including IFAs, quite rightly depends on stopping foul play in our market and that makes commercial sense too, then there is no need to leave it to the FSA (as we did with PPI for 10 years). Rather we should require our provider partners to certify to us that if they trade at all with tele-sales non-advisers, they prove that they have made certain these firms do not play the shabby tricks so many of you recognised when I wrote of them last month.
If they refuse, our business should not go to them except in the very rare cases when it must to treat the customer fairly. In the medium term, even the providers will thank us as their clawback rates fall.
Tom Baigrie, Managing Director of Lifesearch
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Posted by @
02:15 PM, June 17
I entirely agree with your concerns.
I believe the FOS require general insurance firms to record all telephone meetings for the avoidance of doubt as in the event of a complaint the FOS is likely to find in favour of the client. The problem with these "non advised" protection companies is that there is no record of exactly what was said (and not advised). The commission is paid out by the insurer with no conditions and when 10 years later a complaint DOES arise, the firm may well have ceased to trade and the liability of any upheld complant falls on the intermediary sector including those who provide "advised" sales which is unfair.
The solution can be simple.
1. For non advised sales the provider should accept (some) responsibility for the sale and that should be in lieu of recourse to the FSCS.
2. It should be normal practice that ALL non advised sales are recoded as MP3 or wav. files. It is very simple to save the recordings on back office systems (we do using Plum and have just defended our first investment complaint for business written 3 years ago using the recordings which clearly refute the clients accusations of non disclosure of risk and are using them in the reverse in support of a clients complaint against Barclays Stcokbrokers. We have used our recordings on several occassion as evidence of poor service with providersd such as Scot Prov, AXA and AVIVA/NU including calls lasting over an hour on hold music and non returned calls)
3. The provider should/can then randomly check the actual sales discussion to a. ensure material facts disclosed by the client match with those which appear on the application and b. ensure there has been no advice to replace adequate and wider cover with less suitable cover. That would protect the provider form 1 above and it would be a business decision based on the financial strength of the "non advised" seller firm as to how many cases they listend to and what (if any) indemnity commission they paid.
4. An alternative would be for providers to have two options - non indemnity sales only OR indemntiy commission where 1 to 3 above was an FSCS requirement for a provider to be allowed to offer indemntiy terms.
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Client's needs: our client had taken out Real Life Cover (and built-in Family Income Benefit cover) with us last year to protect his finances against illness or death. However, a non-advised company suggested he change this policy to a Life Insurance policy with terminal Illness benefit for a slightly smaller premium. The client believed the policies were the same.
Our recommendation: we contacted the client and explained that with Real Life Cover he already has Life Insurance with terminal Illness benefit. Plus he is also covered for illness, disability, several critical illnesses, as well as against the possibility of having to become a carer for a close family member.
Result: the client realised the non-advised company had misled him and reinstated his existing Real Life Cover policy. Had he not done this, and then suffered a serious illness, his new policy would not have paid out and the client would be left thinking the industry is dishonest - all because of a non-adviser twisting the facts and misleading the client to make a sale.
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Posted by @
02:01 PM, June 17
Does this plan have a review date or are the premiums guaranteed.
What happens if the pot does not have enough funds to meet the benefit@
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