Protection  

Brokers could face Fos claims if they ignore protection

Brokers could face Fos claims if they ignore protection

Mortgage brokers could find themselves dealing with costly complaints if they avoid discussing protection insurance with clients, claimed Sesame Bankhall Group’s sales director.

At the Protection Review conference on 14 July, its chief executive and host Kevin Carr revealed representatives from the Financial Ombudsman Service had warned him of the potential pitfalls of brokers not ensuring clients are aware of the need to protect against the impact of long-term sickness, which could prevent them from paying their mortgage.

Sesame’s Mark Graves agreed that selling a mortgage without documenting a protection conversation could leave advisers open to paying compensation, given the Fos stance on similar cases.

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He said: “From a network’s perspective, if you don’t complete adequate notes to say the client was informed about the need to take out income protection, then you’re vulnerable to claims further down the line.”

A panel discussion began with Mr Carr revealing survey results demonstrating the extent to which most brokers disregard selling protection, with 61 per cent stating the current relationship is broken.

Protection Review asked more than 300 advisers whether or not protection industry integration with the mortgage market needs to be reconsidered. Only 3 per cent said everything works well, while 36 per cent admitted things could be better.

Mr Graves called it a “dereliction of duty” for advisers not to raise the need for protection with clients, saying they had a “moral obligation” to do so. He stopped short of suggesting it be made mandatory, like requirements around buildings insurance, but called upon insurers to change the terminology concerning products to “make sure it does what it says on the tin”.

Financial Services Consumer Panel member Teresa Fritz said most consumers did not know income protection existed, and that the issue of improving coverage is at the bottom of the list for the government and the regulator.

She said: “It’s the job of advisers to make clients understand the consequences, make them see the need. Many more people will suffer from some form of long-term sickness, as opposed to a critical illness.”

However, Andy Philo, distribution director at VitalityLife, responded that the issue is not simply about products, rather being about cover that is appropriate for the individual, although he admitted the application process could be made easier.

Key facts

Protection Review asked more than 300 advisers whether they thought protection industry integration with the mortgage market needs to be reconsidered.

Just 3 per cent of advisers said the current system works well.

Thirty-six per cent said they thought it could be improved.

peter.walker@ft.com