Fairer insurance law for consumers?

Selden

Problems relating to alleged non-disclosures or misrepresentations are regularly raised on this forum.

Should the law in these areas be reformed?

The Law Commissions have recently recommended that for consumers the duty of disclosure should be abolished - if an insurer requires information it should ask a clear question. And for misrepresentation the recommendation is that the outcome should depend on the conduct of the consumer. If the misrepresentation was innocent the insurer will have no remedy, if negligent the insurer's remedy will reflect what it would have done had it known the truth and if fraudulent the insurer may still set the policy aside and reject any claim. This approach is broadly in line with the current practice of the Financial Ombudsman Service.

Do you think these changes will give a fairer deal to consumers and improve the reputation of insurers?

If you would like to see the abolition of the current law you can also vote on the Your Freedom site, though it is painfully slow at peak times...

dunstonh

Problems relating to alleged non-disclosures or misrepresentations are regularly raised on this forum.

Should the law in these areas be reformed?

No. The guidelines issued by the FOS are pretty clear and fair. If anything, they are perhaps slightly more consumer biased than the law would "currently" consider.

The Law Commissions have recently recommended that for consumers the duty of disclosure should be abolished - if an insurer requires information it should ask a clear question

Retail insurance already works that way thanks to the FOS.

Do you think these changes will give a fairer deal to consumers and improve the reputation of insurers?

No. it will just increase administration with no real benefit

Badger_Lady

I'm not convinced, Dunston... you and I are worldly-wise and know how to disclose everything to our insurers, but there are new and young people cropping up all the time who don't know what to disclose or how it might affect them.

The biggest issue I can see is that of (increasingly) people purchasing insurance online. If there's no box to put the information in, how can the customer be blamed for failing to mention something at claim time?

dunstonh

it's a fair point. I see it from the point of view of an intermediary and have that knowledge. With many now bypassing the safety of an intermediary or broker to DIY, you are getting people that don't really know what they are doing taking these things out. However, most of the questions nowadays on various retail policies are not exactly complicated. There may be exceptions of course but we do have to remember that the consumer is equally as guilty of fraud and trying it on with insurance companies as the insurance companies are with consumers. Indeed, probably more so.

However, I do think there has to be some consequence to DIY if you get it wrong. Otherwise, people who can DIY and do a good job of it and therefore benefit from the cost savings will lose out as providers will start to dumb down products even more and remove features and options which more experienced people would use. We are seeing that on the advice side where today, you have to recommend products which are in line with the IQ of the individual. These may not be the best products financially but they have to be appropriate to IQ.

Overall, I think if you increase the protection for consumers, then you should also increase the penalties for abusing those protections or committing fraud.

Steve1981

having spent time selling motor insurance following scripts for recorded calls I fail to see how anyone can misinterpret the questions. the big ones
"Have you or any driver on the policy had any accidents, claims or glass damage during the last 3 years?"
"Have there been any changes to the vehicles standard specifications or any optional extras fitted?"
"Have you or any driver on the policy had any motoring convictions, including speeding offences, bans or any points on your licence in the last 5 years?"
How can any of those be taken more than one way?
dealing with renewing policies too, it shocks me just how many have failed to disclose details.

I read a report that said we experience over 50% of online policies that have been set up incorrectly when it comes to claim stage.
People online, it seems, dont enter the true details as they are just entering info looking for a cheaper price - One chap once entered 2k mileage instead of 20 because he knew it would be cheaper, when I explained he was trying to commit fraud he told me it doesnt count as fraud on motor insurance. or the 19 year old who had a bodykit, alloy wheels, blacked windows, lowered suspension, stainless steel exhaust (all of which would have been a decline) but he didnt disclose ANY of them, it transpired that he had quotes already in a parents name which is how it came out - his reasoning to not disclose was that it would be more than he could afford, and that if he didnt dislose then he wouldnt expect us to pay out in a claim so it didnt make any difference?

On home insurance I have heard of people 'forgetting' that they have been burgled twice in the last 6 months and those that have 2 more bedrooms in their house than they mentioned

similar to what has been put above there are too many people doing it themselves and their only concern is price, they dont seem to understand the implications of what they do or do not enter. Of course there are those that really give the impression that they strugle to dress themselves in the morning and that htey should in no way be using a computer let alone be driving a car

dacouch

Steve1981 wrote: »

having spent time selling motor insurance following scripts for recorded calls I fail to see how anyone can misinterpret the questions. the big ones
"Have you or any driver on the policy had any accidents, claims or glass damage during the last 3 years?" No mention of whether or not you paid for it yourself
"Have there been any changes to the vehicles standard specifications or any optional extras fitted?" No explanation of what you might class as a modification / change
"Have you or any driver on the policy had any motoring convictions, including speeding offences, bans or any points on your licence in the last 5 years?" No mention of pending convictions
How can any of those be taken more than one way?

If your online non disclosure rate is 50% on claims have the senior staff considered that some of them may be caused by lack of clarity on your website

Steve1981

I understand what you mean but, surely if it is asking about ANY accidents or claims, that would mean it would be irrelavent who paid. Again the word ANY in the modifications question would mean anything non standard. Lastly on the pending convictions question, as you would be required to disclose from date of conviction if its pending would it not matter?

the website point is something that has been questioned, though the website is said to be fairly straight forward and the figure is pretty much inline with average percentages.

its just that tick box that people tick and say they have read, when they havent. The amount of people who think 'spouse' means 'related to' is also shockingly high

dunstonh

I read a report that said we experience over 50% of online policies that have been set up incorrectly when it comes to claim stage.

I was reading the other day that life assurance plans online direct to provider account for only 1% of applications (with IFAs still being the majority). The persistency on those DIY life plans was awful with some providers actually thinking of withdrawing from the DIY market as its not cost efficient. i.e. you may cut out the intermediary but if it stays on the books a lot less then its costing you more in the long run.

So, in turn, if you increase the cost of application (which things like compulsory GP reports or evidence requirement will do), then you could see a move away from the DIY market and back to broker/intermediary as it would be them who get that information.

I wonder if the problem is greater because of quote portals asking a generic set of questions which may not be exactly the same as the provider questions yet people speed read them or assume they are the same question when they move from portal to provider.

dunstonh

More shocking is the fact that knowing this your firm nevertheless persists in using the word. Plus, of course, "spouse" does not include civil partners. Would it really be so difficult to change this wording to "husband, wife or civil partner"?

How much do you want to dumb it down by?

Many argue there is too much small print now. Most of that it based on law and complaints. So, the more words you add, the less likely people are to read it. The more chance of error. There is an easy answer to that.

The joke answer would be that you dont allow anyone to purchase financial products themselves if their IQ is below a certain amount.

dunstonh

Are you seriously arguing that a firm should retain a wording which it knows is misunderstood by many consumers who read it?

We are talking about the word "spouse". That isnt a difficult word to know. Once you dumb that down to a certain level, where next? Perhaps no words with more than 5 letters. Maybe produce applications in txt spk.

You cant keep lowering standards to the lowest common denominator.

raskazz

All a fuss over nothing IMO. The FSA/FOS works pretty well on these issues for retail customers as things are. No need for more expense and administrative burden on fixing something that ain't broke.