The Consumer Insurance Act is the first formal change in law in this space for more than 100 years. Paul Dalgliesh looks at the implications for insurers and advisers.
But that does not mean insurers have not had any work to do to implement the Act. Again, as an example, Aviva have been running a project for a number of months which has been guided by a number of outcome based project principles.
That framework has focussed on the following key areas:
• a review of all documents, particularly application forms and declarations. While the Act is specific about how to treat cases of misrepresentation, it does not tell us how to write our literature or to design our application forms, whether paper or electronic. The Act does, however, give us guidance in respect of what will influence an assessment of reasonable behaviour by the customer in providing contractual information:
— how clear, and how specific, the questions are;
— the type of contract in question and its target market;
• our approach to proportionate remedies.
What it means to an adviser
Schedule 2 of the Act (rules for determining status of agents) generally sets the default position to be one where ‘it is presumed that the agent is acting as the consumer’s agent, unless in the light of all the relevant circumstances, it appears that the agent is acting as the insurer’s agent’.
Examples of where the default could apply include whole of market analysis, the payment of a fee for advice or offering impartial advice. Acting for the insurer meanwhile would be evidenced by factors such as a single-tie arrangement or a narrow panel arrangement.
The distinction is important because if the adviser is acting as an agent for the consumer and makes a qualifying misrepresentation, then the insurer will still have a remedy against the consumer.
However, if the adviser is acting as an agent for the insurer and makes a qualifying misrepresentation then in all but a few instances, the insurer will be bound by the adviser’s actions.
It is likely that the processes already adopted and the understanding advisers have in respect of the application process will result in little, if any change.
The basics remain:
• When completing an application with a customer, questions should be asked verbatim;
• Do not lead customers in answering questions. If a customer is unsure of how to answer a question then they should contact the insurer;
• Stress to customers the importance of checking the answers they have provided during the application process and correct any errors or omissions. For paper applications that means going back through the form. For online or telephone applications it means reviewing the replay of questions asked and answers given that will be issued shortly after submission.
The Act provides clarity and certainty for consumers, advisers and insurers. While the delivery impact of the Act has been mitigated by all of the customer outcome-led work implemented in recent years, this should be seen as a further positive in helping customers to protect what is most important to them.
Paul Dalgliesh is head of protection propositions at Aviva