Your IndustryJan 8 2014

Advisers risking reputation with lead generation services

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Many advisers who quit investment business after RDR moved over to selling protection cover where commission payments, possibly as much as 90 per cent of the first year’s premium, remain. But where do they find the clients they need once they have exhausted their old databank?

A number have turned to cold-calling. Others have put their faith – and cash – into lead generation websites, many beyond the regulatory radar. But this still largely unnoticed area could lead to reputational loss, as well as costs.

As a consumer, I was recently phoned by an Indian call centre. It asked for Mr Oliver – no such person exists although my son’s first name is Oliver. The caller said he was from “the Insurance Advice Centre” and had “access to all major advisers and insurances”. He asked my age, whether I smoked, and whether I wanted a family, joint or single life policy.

A second call centre employee said his firm was “independent and had a licence to conduct a review of every life insurance company in the UK”.

Showing interest, I was then immediately put through to “one of our advisers in the UK”. This was Glasgow-based Your Life Direct which already had my details and later told me Insurance Advice Centre was a lead generation company.

According to the FCA register, Your Life Direct is a trading name of Another Life Ltd, which, Companies House records show, has one director, Paul David Kopec, aged 37. Companies House documents also show that Mr Kopec was, between November 2003 and March 2011, a director of Voicestream, a UK company with Indian call centre interests. Voicestream went into compulsory liquidation in July 2012.

Your Life Direct is an appointed representative of Sesame Bankhall, fined £6m by the FCA in June 2013 for, among other items, “a failing in the system and controls that governed the oversight of its appointed representatives”.

Sesame Bankhall said: “Appointed representatives that are members of the Sesame Network are required to adhere to all regulatory requirements in relation to the way they market their services. Our member firms are expected to conduct appropriate due diligence on any business that may introduce customers. This includes only working with firms that have all the necessary FCA authorisations.

“We regularly inspect our appointed representative firms, and within that inspection, we would normally review the firm’s practices and controls in respect of lead generation.”

The FCA said: “There are no cold-calling restrictions for general insurance business, although firms must consider the need to be fair, clear and not misleading in all communications.”

Online there are some 20 unregulated sites promising quotes on complex protection policies such as private medical insurance, critical illness and long-term income protection “within 30 seconds”.

Some ‘borrow’ the names of legitimate brokers. Googling , for instance, ‘Anglia Healthcare’, a regulated PMI specialist, produces the unregulated Healthquotesonline website in prime position. It said: “Compare Anglia health plans, get the cheapest quote online now!”

Only sharp-eyed potential clients notice the word ‘ad’. This exercise can be repeated with many other brokerages.

Some sites clone pages or information from regulated intermediaries. Medical-guardian.co.uk features details of broker Chase Templeton.

The webpage states: “Get top-class Chase Templeton Healthcare offers personally tailored for you. Just complete the application form above to gain access to non-public rates. Saving over 40 per cent: By using our website, visitors will qualify for private rates saving over 40 per cent. Get access now.”

Warren Dickson, chief executive of Chase Templeton, said: “Medical Guardian has no connection whatsoever with Chase Templeton. Our logo and name have been used without our permission and we are referring the matter to our legal advisers.”

He added: “Unfortunately this is an endemic problem. These sites appear, and seek to generate and sell leads in a wholly inappropriate manner, and, when taken down, promptly reappear under another guise.”

Besides offering instant quotes, which they cannot do, rogue sites often claim to be independent but pass details to in-house salesforces, while some feature logos of major insurers without permission including old names such as Norwich Union. Consumers searching for cover will have no idea the site is outside UK financial regulation and may ignore data protection law.

Moneysupermarket, in common with other regulated comparison sites, sells long-term IP and PMI leads to brokers. It is concerned that the large number of unregulated sites could confuse both brokers and clients.

Emma Walker, head of protection for Moneysupermarket, said that unregulated sites have mastered search engine algorithms. “They know how to use loopholes to top lists. They know hardly anyone looks beyond the first few entries, let alone the second page. One way to achieve a high ranking is via content, cloning material from a reputable source helps,” she added.

Unregulated sites bid heavily for the coveted top search engine advert spot. They can afford to pay as they pay nothing for compliance, and probably little for staff and premises.

Brokers tempted to lay out £35 to £50 for an unregulated site lead need to ask the details’ provenance. More unscrupulous sites will sell leads already used elsewhere (known as ‘multi-distribution’). This can lead to consumer confusion – or worse. Customers may wonder how often their details have been sold. And as many sites make unjustifiable claims, policyholders might have eventual cause for complaint.

All this adds to acquisition costs – especially if the leads are low quality. PMI brokers can find free leads from the Association of Medical Insurers and Intermediaries site.

Brokers could risk their name using these sites and insurers face a potential backlash because of unauthorised logo use but so far few insurers have proactively policed their intellectual property.

“Brokers need to understand where their leads come from,” said Ms Walker. “They should ask for recommendations from other brokers. And they should not be confused by insurance company logos, many are there without permission. This is a growing issue but one still scarcely discussed or debated. ”

Some brokers buy from these sites, or use call centres, in good faith assuming the source is reputable. “But all intermediaries purchasing protection leads need to ask the questions – if they don’t there may be a presumption by clients and regulators that they do not want to know. And there could be data protection act difficulties as well,” said one compliance expert.

In April, the FCA said that it would use powers under section 137S of the Financial Services and Markets Act 2000 to ban misleading financial promotions. This means it can remove promotions immediately from the market, or prevent them from being used, without the enforcement process. Whether it can be used against regulated firms using unregulated lead generation and other marketing is so far untested.

But with memories of the horsemeat scandal where every link needed to be checked, regulated firms may not wish to take risks that the FCA will ignore the rest of the lead generation chain.

Tony Levene is a freelance journalist

Key points

- Advisers’ use of lead generation sites could lead to reputational loss as well as unnecessary costs.

- Online, there are some 20 unregulated sites promising quotes on complex protection policies such as private medical insurance, critical illness and long- term income protection “within 30 seconds”.

- Brokers need to understand where their leads come from.