Advisers have been warned their clients are being increasingly targeted with insurance cold-calls.
FTAdviser has learnt of advisers and their clients receiving calls from telephone based protection companies who claim to be able to "beat" their current policy on price.
The advisers are concerned that such calls, during which the firm tends to offer alternative policies that don’t necessarily match the consumer’s original product, could leave consumers worse off and hurt the industry as a whole.
The trend has led to members of the industry calling for a ban on cold calls similar to the ban on pensions cold calling which came into force in January of this year.
FTAdviser understands some of the callers go under the name 'The Life Insurer's Review Team'.
These callers often say they are representing "all the major providers" and tell the consumer it's time for them to review their policy.
Alan Lakey, director at Highclere Financial, said he has received a number of calls from "protection experts", as have his friends and clients.
He said: "The general setup seems to be that they ring a consumer, ask them how much they are paying for life insurance or income protection and then tell them they could do it for cheaper.
"Sometimes the caller shows a very low understanding despite calling and claiming to be protection experts, often comparing policies that don’t do the same thing or cover the same time period or range of illnesses.
"I asked for a comparison between the wording in my current critical illness policy and the one they were offering and they could not provide it."
One firm was even purporting to be another regulated firm, Mr Lakey said.
Mr Lakey said one caller had offered life insurance at a cheaper monthly rate because the policy ended at 80 years of age rather than ‘whole of life’ and told the consumer they did not need life insurance beyond 80 years old.
He said: "It’s very dangerous for the clients these companies are targeting. They could end up with a policy that either doesn’t cover an existing condition or just a worse policy.
"The worrying thing is they could do it to my clients and I’d be unaware."
Mr Lakey said there should be a ban on cold calling in the protection industry as "most people are unhappy or even scared by telephone incursions on their home life or privacy" and that without some form of restraint, "any old Tom, Dick or Harry can get involved and create mayhem".
He added the General Data Protection Regulation should make most of these unwanted contacts illegal, but Alan Knowles, chairman of the Protection Distributors Group, said it was clear companies were either finding a way around the new data protection rules or just ignoring them.
Mr Knowles told FTAdviser the PDG was looking into the issues surrounding such calls after a rise in the number of incidents reported to it.
The PDG formed in 2016 with plans to improve the insurance market for consumers as a ‘force of good for protection’.
Mr Knowles said: "The bigger distributors are coming across it quite a lot — we almost believe its some of these could be old PPI firms but we’re not sure.
"They’re usually calling from a dummy number which doesn’t ring through to a proper company.”
Mr Knowles said the issue was a slur on the industry as the callers were misselling protection and it was the customers who were losing out.
He said: "They’re being sold policies that are probably worse than their original one. The policies are then not going to pay out.
"I think we’ve got to be careful not to introduce fear-mongering because we do not want to paint insurers or advisers in a bad light due to some dodgy firms.
"The best thing for advisers to do is to have a good relationship with their clients and ensure to keep that relationship going so that, if the client does get the call from one of these firms, they will double check with their advisers."
Jiten Varsani, an adviser at London Money who has also experienced these calls and had noticed a rise in numbers since the start of the year, also thought there should be a ban on cold calling for protection alongside greater regulation and Financial Conduct Authority oversight to ensure that protection planning is treated with the importance it deserves.
He said: "The way these firms call up is scary because as an adviser we know so much better but for a consumer who may not know as much, they could quite easily make a detrimental switch.
"I’ve heard these callers often tell the consumer they need a review — which is worrying because that’s what we tell consumers when they take out the policy."
One example Mr Varsani gave was callers offering a terminal illness policy as a substitute for a critical illness policy.
Terminal illness cover is often included in life insurance as standard and will pay out a lump sum if the client's doctor has confirmed they have a terminal illness and are likely to die within 12 months.
Critical illness, however, is designed to cover serious health conditions from which policy holders might recover.
He added: "This does big damage later on when the policy doesn’t cover certain things or do the things the consumer thinks it does.
"The company then often disappears, leaving only the damage to the client and the industry."
imogen.tew@ft.com
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