Helping clients understand decisions

Over the past few years, the protection industry has made a lot of progress in addressing the issue of consumer trust, in particular by reducing the number of declined claims.

This work is now bearing fruit, as evidenced by the fact that fewer claims are being referred to the Financial Ombudsman Service. This is great news for consumers and the protection industry.

But as we are unlikely to reach a position whereby the FOS gets no protection complaints at all, it’s good to see it improving its communications and using a consumer leaflet to explain how decisions about non-disclosure are made. The leaflet is well written, uses plain language and should help consumers understand the reasons behind insurers’ decisions about their claims.

As an industry, we could use the information in this new leaflet to good effect in other ways. Insurers might find it a useful checklist to ensure claims decisions are fair, first time and every time. This is important because when the FOS overturns insurers’ decisions, the perception is often that the industry was wrong to decline the claims in the first place.

Advisers might also find the leaflet valuable in helping to explain the need for clients to answer all the questions in the application to the best of their knowledge. In setting out how the FOS goes about resolving problem cases, the leaflet explains the rights and obligations of consumers. It states: “Insurance companies are entitled to know about a consumer’s medical history so that they can properly assess the risk they are insuring. Insurance companies should ask clear questions when a consumer applies to take out an insurance policy with them. And consumers should answer clear questions from insurance companies to the best of their knowledge and belief.” Well put.

Although we know it’s not true, some consumers think insurers trawl through medical records to find those proverbial ingrown toenails to use as excuses to avoid paying claims. But the leaflet explains that insurers can only turn down claims if the omitted information is material to the risk involved. This might reassure some potential clients.

It also contains helpful information about the role of brokers in the application process. It explains that when brokers deal with a number of insurers, they are acting for their clients and are responsible for passing information on to insurers.

One inference is that brokers could be held to account if this doesn’t happen. This is why advisers should ensure their clients answer questions to the best of their knowledge and have the opportunity to check relevant information at a later date. If your clients do this they can be sure their claims will be paid. If necessary, the FOS will guarantee it.