Critical Illness Cover

dunstonh

He said that they checked after the claim was made and found he hadnt disclosed information at that time. In other words he was committing fraud. Its easy to blame the insurance companies in these cases but there is no need for the insurers to check your medical history unless you disclose something on the application form which needs further clarification. It would be unworkable to check every case. The cost would sky rocket and the doctors would be flooded with requests.

OshayAway

dunstonh wrote:

With guaranteed policies currently pricing with very little difference, there is no reason to go reviewable and face a price hike in the future.

I think it may be a generalisation to make a blanket statement. Would you agree that this should be looked at on a case-by-case basis? Often Guaranteed premiums are 30%+ more per month and in some cases, that ceases being a viable affordable option.

It's also important to note that premiums change on review only as a result of industry wide claims experience or expected rise in claims. Are you aware of a single insurer who has increased their premiums at point of review?

In point of fact, there is also provision for premiums to be reduced in review if the is a drop in claims e.g. as a result of the advances in medical science.

I think there can be a danger of advisers scaring their clients off Reviewable premiums because it is an easy way for them to 'sell up' get them to spend more money, therefore make more commission in the process - regardless of the facts. Unfortunately, this can have the effect of the individual(s) not being able to justify the cost or perceive it to be too expensive and not take any Critical Illness Cover at all.

However, I would say that if there is only a small difference in cost then guaranteed premiums are obviously the more attractive option.

dunstonh

I think it may be a generalisation to make a blanket statement. Would you agree that this should be looked at on a case-by-case basis? Often Guaranteed premiums are 30%+ more per month and in some cases, that ceases being a viable affordable option.

Fair comment if the premiums are high enough that it makes that much of a difference. However, if you are talking the difference between £15pm and £18pm between the two, then guaranteed makes a lot of sense. Also, its the safer option.

Are you aware of a single insurer who has increased their premiums at point of review?

Yes. For example, HSBC did it around this time last year. An average 18% increase.

I think there can be a danger of advisers scaring their clients off Reviewable premiums because it is an easy way for them to 'sell up' get them to spend more money, therefore make more commission in the process - regardless of the facts.

Why do some people always bring things back to commission? Seems so petty and lacks understanding on the reasons behind these things. You would be faced with a potential mis-selling claim if you didnt recommend the better policy. If the lower quality product is then sold, the documentation should include a reason why reviewable was picked over guaranteed.

Using the HSBC example above, a number of people took their complaints to the ombudsman. In this case, they were not upheld as a reviewable product was all the HSBC sold. However, IFAs and independent protection advisors can sell both types and have a duty of care to recommend the best product available as first choice.

darktrader

http://www.pegasus-fs.com/

Mine was arranged through a IFA.

dunstonh

darktrader wrote:

http://www.pegasus-fs.com/

Mine was arranged through a IFA.

Their site is in breach of FSA rules. A bit risky considering that websites are on the current FSA watch list. If you have a relationship with them, you may want to point out to them that they are missing the FSA complaince messages on their website. No point them facing action when only a paragraph of compliance text need to be added to the bottom of the page.

OshayAway

dunstonh wrote:

Why do some people always bring things back to commission? Seems so petty and lacks understanding on the reasons behind these things.

Not really, I am simply stating that there is no justification for saying that Reviewable policies are "basically a no no" and "there is no reason to go Reviewable". Advisers have a responsibility to justify the products they recommend, making their clients aware of all relevant facts.

I think it shows a lack of understanding to not realise that some advisers can and will disregard the cheapest policies not simply on merit but rather to encourage their clients to spend more money. The fact that more commission will be paid is the obvious motive.

dunstonh wrote:

You would be faced with a potential mis-selling claim if you didnt recommend the better policy. If the lower quality product is then sold, the documentation should include a reason why reviewable was picked over guaranteed.

Reviewable policies have nothing to do with the quality of the cover, just the cost and potential for the premium to increase (or decrease) in future.

As for the reason why or suitability letter, this is a Statement of Demands and Needs of the individual(s) covered by the plan. For many people, cost and value for money is very important, that will include reviewable premium policies in many cases. In these cases, there is no justification required for arranging a reviewable policy over guaranteed. Neither is there any potential for a mis-selling claim if these options and facts are explained to the client.

In fact, recommending a more expensive policy without considering cheaper reviewable options could cause problems for the adviser if it was cancelled as a result of not fitting the individual’s requirements, demands and needs including budget.

This is why reviewable based critical illness policies should not be automatically dismissed out of hand.

As for my question earlier about insurers who had increased their premiums on review, I was referring to any major insurers that an IFA or Protection Adviser would have access to.

dunstonh

Reviewable policies have nothing to do with the quality of the cover, just the cost and potential for the premium to increase (or decrease) in future.

It does if you are an IFA. Although IFAs have a higher standard to observe than say a mortgage and GB/protection advisor.

Where an equally suitable or better product exists, you have to mention it on the suitability report along with the reasons why it wasnt chosen. In this case, someone chosing reviewable over guaranteed would have a paragraph mentioning guaranteed premiums were available but the client didnt wish to pay that amount.

Any protection advisor not covering riders/options and possible alternatives would be wise to start doing so otherwise they could face a higher liability for mis-selling in the future. All it takes is one complaint from someone who gets an increased premium to say they werent told about guaranteed premiums and you are stuffed if the report doesnt cover it off.

For reference, I just checked with compliance (with my network) and they confirmed that:

There are three factors you must always consider when deciding whether a particular insurance product meets your customer’s demands and needs:
• Is the level of cover enough for the risks the customer wants to insure?
• Cost – versus other policies in your range that cover similar demands and needs
• Relevance of any exclusions, excesses, limitations or conditions in the policy.

The rules recognise that buying insurance is about balancing the customer’s desire, or need, for protection against certain risks against the amount he can afford, or is willing, to pay in premiums. Cost and risks covered will obviously pull in different directions – but they are both relevant to a customer’s demands and needs. A customer may decide to lower his sights in terms of the risks insured, or levels of cover, in order to save money. This is fine – but make sure you document this decision in the suitability letter.

I don't know if you are a designated investment advisor, a protection advisor or just a consumer but if you are an advisor and you are selling reviewable plans without any reference to guaranteed, then you are running a high risk for potential mis-selling claims.

I was at a compliance meeting recently. They mentioned that they had 1000 complaints running at the moment per month. Out of those complaints. 225 were upheld but only 25 were upheld as mis-sold products. The other 200 were upheld not because they were mis-sold but because the client files/documentation failed to prove they were not mis-sold. The compensation for those 200 cases was running at over a million pounds per month. All because someone forgot to put a paragraph in their suitability report.

OshayAway

The quote from your network's compliance department upholds my point. The reasons given for you to document a clients decision is in regard to them choosing cover that is of a lower level or not protecting all the risks they may at first have wanted to. It does not say anything about the so-called 'pit-falls' of arranging reviewable contracts.

Is it your network's possition that reviewable policies should be discouraged? Do they advise anywhere that you need to protect yourself when arranging reviewable policies?

Of those 1000s of complaints that are being handled, I doubt any of them have to do with increases in reviewable premiums. I bet some are down to products being sold that proved unaffordable though.

dunstonh

The quote from your network's compliance department upholds my point. The reasons given for you to document a clients decision is in regard to them choosing cover that is of a lower level or not protecting all the risks they may at first have wanted to. It does not say anything about the so-called 'pit-falls' of arranging reviewable contracts.

Sorry, i read that totally different to you.

A customer may decide to lower his sights in terms of the risks insured, or levels of cover, in order to save money. This is fine – but make sure you document this decision in the suitability letter.

It clearly says there that you should document it. So, in the case of CI, you are looking at waiver, reviewable and budget CI over comprehensive as the options which would need to be documented.

Is it your network's possition that reviewable policies should be discouraged? Do they advise anywhere that you need to protect yourself when arranging reviewable policies?

Networks do not dictate sales tactics of a company. They look at the complaince side to how things should be documented and how advice should be given.

Of those 1000s of complaints that are being handled, I doubt any of them have to do with increases in reviewable premiums. I bet some are down to products being sold that proved unaffordable though.

They probably don't. However, they are very similar. Insufficient documentation to prove justification. Remember the network isnt the one earning the commission or the one liable for the compensation. They are there to provide the compliance guidence to reduce liablity in the future. They dont care if all the cases sold are reviewable or guaranteed. Their focus is that the case is written is compliant.

The rule of thumb is that any product which is comparable or better than what you are selling should be documented as to the reason why it was not chosen. Cost is a valid reason. If you fail to put that in your report and someone complains that they have a price increase and would have gone guaranteed premiums had they known, you are then reliant on what was put on the report. If the report says that guaranteed was not chosen as it was too expensive, then complaint not upheld. If there is no documentation showing that guaranteed was mentioned, then complaint could be upheld as an inferior product was sold.

IanDC_2

Just who do you think you are dunstonh accusing me of fraud, you are so quick to defend the insurance companies.If the use of medical records to defend and avoid a claim is not sharp practice what is. Take it from me village-life insurers do have retrospective under write forms. Please insist on the medical report, dunstonh is an IFA I`m sure all his advise is in complience with network and FSA regulations, but ask your self this question, is your IFA. I dont accept that it would be unworkable, a report cost`s £70 or so, but the £70 provides a cast iron cert you are on cover, this may be one or two months premium, a fraction of the commission the IFA gets for selling the policy. Another MUST get a copy of the proposal form and any entries made on it, fill in the form yourself, you will only see the proposal form again in the event of a claim, which as I have said before it`s to late. Finaly I add that my non-disclosure went back over 10 years, so do you have that kind of recall, and it was for a medical condition listed at the time as no more sinister than a eye infection. I can`t say to much more as I am still fighting my case, I await your apology dunstonh