LifeSearch

Call 0800 316 3166 for free and friendly advice

Navigation

LifeSearch Home > Protection Reports

Protection Report No. 8 (page3)

Invisible Touch

In striving to make the protection industry more transparent, through advising and informing with openness and honesty, one must also ask if the non-advised sales process is transparent for consumers. A growing number of people are now purchasing in this way and I believe that non-advice in protection is very transparent; in fact it is so transparent that most of the important information is invisible!

Having researched many non-advising websites over the last 12 months, in my view not one of them gives a consumer enough information to make an informed decision as to their protection needs or how their rights are altered depending on the way they make this purchase.

Would you want to know that if you buy without advice, and your policy doesn’t do what you thought it would, that you might not be able to seek redress from the Ombudsman? If no one advised you as to the suitability of the product, there is no one to claim against, but at no point of a non-advised sale is this mentioned or made clear. Is it not the seller’s responsibility to inform the consumer of their rights? It is everywhere else.

Many list the Ombudsman’s details in their literature and on their websites. If you had to make that call and the Ombudsman says ‘sorry can’t help you’, I believe you would have wanted to know that this was the case from day one.

The big brand non-advisers began to enter the protection market around 5 years ago and they continue to treat protection in the same way they treat tins of tomatoes. Actually it is worse than that. Because their research shows consumers know about tomatoes, they offer lots of choice, but because their research shows their customers know little about protection, they sell the most basic of product types, tied to one provider so that most people never get to find out about what could be the most suitable product for them. Products that are often the most suitable, such as Income Protection and Family Income Benefit, which can also offer a better value premium, are not sold by non-advisers.

Unless the consumer seeks advice, which they are led into thinking they do not need, they might never know that a better option exists. They will think that their £100,000 life policy, not written in trust, will be enough for the family to live on should the worst happen. That’s what the marketing clearly implies after all so why should we expect them not to believe it? But what happens if Gordon Brown takes 40% because the policy proceeds are subject to inheritance tax? The family is left trying to work out how to invest £60,000, not £100,000 and we all know that £60,000 won’t go very far. But if the family had bought a £15,000 per year single life Family Income Benefit in trust they could have had 3 – 4 times as much money for a similar premium.

Shrewd marketers have persuaded them they can buy both wisely and cheaply, but this practice of withholding important information – about taking responsibility, providing suitable products and allowing access to the Ombudsman – is clearly not treating customers fairly. It clearly is not transparent.

The regulator must move the market to a place where ALL non-advisers must sell their products responsibly. This must mean ensuring customers know what their options are and understand the responsibilities being placed upon them before they buy.

Linda Tyson, Policy Adviser

PPI fought the law

The Office of Fair Trading recently launched a market study to look in depth at the payment protection insurance (PPI, including MPPI) sector. The study follows a super-complaint from Citizens Advice.

LifeSearch, along with many others, welcomes the study as we have long said that the product, although suitable for some, is often both overpriced and inferior when compared with other protection products. We also believe that the way in which these products are named, explained and promoted to consumers is not transparent.

Some companies believe that MPPI should not be confused with PPI. In truth this is a somewhat weak argument as the two are very similar, in particular when compared with true Income Protection. Such companies also continue to harp on about the price of PPI and MPPI as the most important factor - but they never mention the quality of the product. These products can vary greatly in terms of the cover provided, exclusions, benefit period, occupation class and underwriting and the view of many is that the cheaper the premium, the harsher the terms are likely to be.

Last year we criticised a number of companies, most of them non-advising websites, for naming their ‘PPI’ products ‘Income Protection’ or similar and we called upon them to change as this is clearly misleading for consumers. In addition, it is ridiculous to expect consumers to understand all the different types of products and to be able to differentiate and understand all the industry’s acronyms, such as PHI, IP, PPI, PMI, MPPI, IPP and IPI.

We have called for the new ABI Protection Committee to review this situation and issue a statement of best practice regarding PPI related product names and how they are explained to consumers so that we can bring an end to this consumer confusion.

An Income Protection policy should be your first choice. MPPI policies have many exclusions and payment protection insurance on loans and credit cards offers little benefit. Income Protection cover is nearly always a better option and isn’t always more expensive. Consumer’s Association, March 2005. I am pleased my own scepticism and the expert advice from LifeSearch has saved me from making a mistake. LifeSearch customer Mr Labinjo, speaking to The Telegraph, March 2006. It seems to me the best PPI provider can proudly consider themselves to be the cream of the crap. Tom Baigrie, January 2006.

 Page 1         Page 2         Page 4         Page 5         Page 6         Page 7         Page 8

Back to Protection Reports