Fired up by a mix of youthful exuberance and indignation, it was not difficult for me to pick large holes in an area of insurance that seemed designed only to pay up when all else failed.
Insurers, egged on by their reinsurers, seemed to enjoy trawling through claimants’ medical records to discover any form of non-disclosure (however trivial) that could be used to invalidate a claim. For a long time, the Association of British Insurers (ABI) was quite happy to condone such behaviour.
Yet the past, however grubby, is the past. The financial protection industry has moved on and today it is no longer the beast it once was. Some good work from the ABI, plus a number of great industry initiatives – for example, the Seven Families campaign plus the formation of ‘think-tanks’ such as the Protection Review – means we now have an array of financial protection insurance products fit for purpose.
The financial protection industry has moved on and today it is no longer the beast it once wasClaims data for individual insurers are no longer locked away in the safe of the chief executive’s office, never to be seen by anyone outside the business. Now, with successful claims rates regularly up in the 90s, it is published with fanfare. Indeed, some insurers are quite happy to ring and give me their latest figures as an ‘exclusive’. Miracles never cease.
Putting protection insurance on the map
Today, I see a steely determination by some within the industry (advisers and company experts) to put protection insurance on the financial map – to make it more mainstream and consumer-friendly; to promote it as an essential piece of financial furniture.
None more so than Johnny Timpson at insurance monolith Scottish Widows. Although he comes with a long job title – financial protection market and industry affairs manager – this caring individual was instrumental in getting his employer to back the production of an important educational film (Change Of Heart) charting the first heart transplant in 1967.
This monumental event led, in turn, to one of the doctors involved in the transplant (Marius Barnard) going on to create critical illness (dread disease) cover.
Yet it is not just Scottish Widows doing its bit to wave the protection insurance flag. It is also refreshing to see a new ‘protection challenger’ – Guardian, run by Gryphon Group - enter the fray, determined to do things right by the customer. In other words, to shake things up a little.
What I particularly love about Guardian’s debut is its pledge on cover upgrades. Rather than setting a policyholder’s cover in stone, it has promised that when it improves definitions (as all insurers do from time to time), they will not just be applied to new policies sold; they will also apply to existing policies. If the upgrade results in a premium increase, Guardian will offer existing policyholders a choice: stick with what they have got or twist to the upgrade.
I have long argued for insurers to work on this basis. It is called treating customers fairly and it should be part of an insurer’s DNA. It is simply not good enough to sell people products and then leave them be as new improved policies come along. Existing policyholders should be embraced, not forgotten.
This very point was brought crashing home a couple of years ago when a work colleague tipped me off about the case of Hein Pretorius that had been reported in his local paper. Mr Pretorius had been involved in a serious motor accident which resulted in the amputation of his right leg.
Although shrewd enough to have bought critical illness cover with both Bright Grey (part of Royal London) and Legal & General, the policies proved worthless in his hour of need. This is because the terms of both policies stated that a total permanent disability payout would only be forthcoming if the accident had resulted in the loss of both legs.
Of course, nearly all critical illness policies sold today will pay out on the loss of one leg but there are still old policies out there, like the ones that Mr Pretorius had, that have never been updated.
As a financial expert told me at the time, there is no duty of care on insurers to inform existing customers that they have improved new policies or that it would probably be best for them to consider upgrading. Some brokers, he added, are also reluctant to get involved in cover switching for fear of falling foul of the regulator.
It is to the industry’s discredit that Mr Pretorius, now 46, has literally been forced to beg via Facebook for donations so that he can retrain for a profession that will accommodate his life-changing injuries.
Guardian’s willingness to offer adaptable policies has been welcomed by those who are intimate with the inner workings of financial protection insurance – the likes of Alan Lakey at CIExpert and Ian McKenna of Finance & Technology Research Centre. They state the insurer has shown some “fresh thinking” (Mr Lakey’s words) while its cover is a “real win for consumers” (says Mr McKenna).
More please. Let us hope Guardian’s bold step triggers a revolution in the financial protection insurance world.
Jeff Prestridge is personal finance editor of the Mail on Sunday
