News Review: General Insurance
Make sure your add-ons add up to TCF However, just because
by Gary Little, head of key accounts, Assurant Intermediary
Selling add-on covers to general insurance products such as buildings and contents makes good business sense. add-ons (or optional extras,
as the Financial Services authority likes to call them) can make a significant difference to the overall cover your customer has in place. Providing additional covers for specific events such as legal expenses or home emergency can help them walk away with an insurance package that is tailored to their own individual needs and circumstances. and of course selling optional extras provides you with an opportunity to generate additional revenue for your business.
add-ons or optional extras don’t form part of the main policy doesn’t mean that you can apply any less rigour in assessing suitability and eligibility of the customer for the products you recommend. nor can you ignore the principles of treating customers fairly.
Add on TCF unfortunately, according to the FSa, it would appear that a number of small general insurance brokerages aren’t just failing to treat their customers fairly, they’re not even sure whether they’re conducting an advised or non-advised sale when selling add-ons. the FSa conducted some
research into how small firms offered, explained and confirmed optional extras to their customers. they focused on documented forms where customers had been sold further optional insurance in
Getting add-ons spot on
• Am I providing my customers with clear, straightforward and not misleading information about the optional extra so they can make an informed decision without being overloaded with extra documentation? • Am I making it clear that the optional extra is just that - optional? • Am I making the price of the optional extra clear? • It is obvious that the price of the optional extra is separate from the price of the main insurance policy? • Am I providing advice? • If so, am I taking the necessary steps to assess the customer’s suitability for the optional extra? • If I am providing advice, am I explaining how
18 mortgage introducer OCTOBER 2011
addition to their main policy. in all cases, the optional extras were sold as separate contracts of insurance with a different insurance provider from the main policy. the FSa’s main objective
for this research was to establish whether the approach to the sales process was consistently communicated to customers in a clear and straightforward manner, in line with the principles of
treating
customers fairly. a total of 201 insurance
transactions from 47 firms were reviewed by the FSa. the results were covered in the insurance trade press in august 2011. the FSa reported that in 70% of the records, the information that had been presented to the customer was unclear. in all 201 records the information presented to the customer was potentially misleading. the FSa found that firms had not explained
the proposed additional cover will meet their demands and needs? • Is the format of the Demands and Needs statement clear and concise? • Is it consistent with the level of service outlined in the initial disclosure document or terms of business? • Am I providing information only and leaving it to the customer to make a choice about how to proceed? • If so, does the documentation I provide make it clear that the sale of the optional extra is on a non-advised basis?
If you can’t answer these questions positively or have any doubt about any answer, then it’s time to thoroughly review your processes. The FSA has made it clear that it will take action against firms that deliberately seek to mislead their customers - so be warned!
what the add-on cover would do (or that it was optional), how it matched their customers’ demands and needs, and had not properly disclosed the price to the customer.
Add on advice the FSa also found that some firms were unclear as to whether they were advising and what constituted an advised and non-advised sale. in 73 of the 131 transactions reviewed, documentation indicated ‘advised sales’ where there was no advice or a recommendation from the firm for the additional extra, and in some cases no recommendation for the main policy. While the finger appears
to be firmly pointed in this instance at general insurance brokers, mortgage intermediaries
should
not sit back and rest on their laurels. given the results of its study, it comes as no surprise that the FSa has warned that it will be conducting a further review of disclosure. this will focus on disclosure documentation,
including
demands and needs statements, and will inevitably look at how firms deal with optional extras. if you have any doubts at
all about your sales practice when it comes to selling optional extras such as adding legal expenses to home insurance cover, take a step back and review your process. You must be sure that you are selling these products to your customers in a way that is clear, fair and not misleading.
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