As June turned into July, it soon became apparent that the protection industry was not going to ha...
As June turned into July, it soon became apparent that the protection industry was not going to have a quiet and peaceful summer.
Instead, there was a flurry of activity in the sector, with the Financial Services Authority publishing both its Insurance Conduct of Business Review and its Retail Distribution Review; the Law Commission announcing its intention to introduce a five-year cut-off clause for life cover claims; and Friends Provident and Resolution going public with their plans to merge.
The announcements received a lukewarm response from the sector, with the Law Commission's proposal, in particular, being met with a brutal beating after it was revealed that it did not have a decent leg to stand on.
The proposal suggested that a five-year non-contestability rule should be implemented. However, this would only apply to life insurance, with all other protection products being sidelined, meaning that the cut-off clause would only be applicable to life cover even when critical illness (CI) is attached to it.
This, clearly, makes no sense. Firstly, the issues surrounding declined claims have always been mainly associated with CI and not life, for which over 90% of claims are paid out. Secondly, some providers claim that they already use an unofficial five-year cut-off point for life cover, making the proposal rather unnecessary. Thirdly, and most importantly, just the thought that this proposed law could be applied to parts of a product and not its entirety is sheer madness as it would add another layer of complexity, and no doubt increase consumers' distrust in the industry.
At a time when consumer confidence is at an all-time low, hollow guarantees such as the Law Commission's proposal will not help. If the industry truly wants to try to bridge that protection gap, it has to start delivering real benefits and not just empty promises.
Johanna Gornitzki, editor
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