Business Protection  

Advisers face legal threat from group risk timebomb

But she added: "Very often it is the case that the issue has been raised but [the employer] has chosen not to deal with it", in which case advisers would not be at risk.

John Kerr, director at London-based advice firm Kerr Henderson, said: “Unless advisers actively review the group risk arrangements regularly with their clients, mindful of recent legislation and so on, they are inevitably going to expose themselves to professional indemnity claims should some relevant issues not be discussed with their clients. 

“Needless to say, these discussions should be documented in writing with the client especially should the client choose to ignore their advice

“I think a lot of people out there are being looked after by advisers who do it as a sideline rather than a specialist. They are possibly leaving themselves exposed by not being specialist.”

Paul Avis, marketing director at Canada Life, said: “I find it astonishing that since Grid got the default retirement age exemption for group risk products in October 2011, that advisers have not amended the cessation age to ‘65 or state pension age’ in 43 per cent of group income protection cases.

“I do wonder, after such a long time period has elapsed, how much actual group risk consulting is going on in the market when such a great win by the industry has not been communicated to employers.

“The direction of travel is clear. The state pension age will only go up, and in a recent Fos case the need to get termination ages on the correct basis was highlighted when a client said that he was not happy that his termination age of 60 was not maximising the 65 or state pension age exemption. 

“Fos found that because the adviser and employer had not amended the age, there was no case to answer from the insurer, and so it is incumbent on the adviser to tell employers to utilise this exemption to make sure there is no period of self-insurance, which could undermine the exemption.”

Glenn Thompson, Unum's director of customer solutions, said the provider was working proactively with customers to address any gaps in their protection.

Chris Morgan, chief marketing officer at Ellipse, said the provider had been encouraging advisers to review their clients’ policies.

simon.allin@ft.com