Picking up on my prior ranting about a recent FSCL case study.
Thursday, December 12th 2024, 9:30AM
by Jon-Paul Hale
Let's deal with the complaint situation:
The insurance company cancelled the cover.
This appears to have been through a complaint process and suggests the insurance company came to a settlement of some sort to pay the client what is probably at least the face value of the cover.
I can't see how the insurer can do that without paying at least the face value of the cover.
The client was largely satisfied with this outcome, suggesting it was more than the face value and more likely included the overpayment.
Vulnerability. I appreciate the fall, and the hospital stay would have been challenging, but this is an issue at complaint time, not advice time. This isn't a factor in the professional advice review.
It is an issue for FSCL in the way they operate with a vulnerable client and likely increased their need to "find" a solution for the client being that the client was vulnerable when FSCL was engaged.
It was more stressful knowing the client didn't have funeral cover in place during their hospital stay.
Ah, so where's the money that was paid to them by the insurer? This is instead of the coverage being in place and is already in their bank account.
Additionally, the client clearly saw value in the cover for the premium being paid; they still wanted the cover during the complaint process against the adviser!
While the adviser has apologised and copped to the payment, this is more about making it go away than addressing a professional complaint.
Let's recap:
The policy was taken before any advice regulation was enacted.
The client sounds like they have not had a review, but it is questionable if the client engaged in requests for review.
There is also no clarity on the adviser offering a review either.
The insurer had been providing annual updates and engaged with the complaint they received.
Again, the letters have an offer to have a review.
Under the new rules, the FAP is responsible for the advice they provide.
It sounds like the FAP has not provided advice to the client on the suitability of this contract, so how is this captured by the current rules as a professional complaint against the adviser?
If the link is being drawn because the adviser was receiving renewals. Let's revisit this for the umpteenth time.
Renewals are paid to the adviser for the ongoing value of the contract to the insurer introduced by the adviser.
Renewals are not service commissions; agency agreements do state service commissions where they are paid and for servicing.
I'll say it again: renewals are not service commissions.
Renewals do not convey any direct service requirements. Some agency agreements do stipulate an expectation of providing service to clients; however, this is not directly related to the renewal commissions being paid. It is just good business to provide service to retain clients.
FSLAA does not dictate any service requirements but states that there needs to be an agreement for ongoing service.
That agreement can be no ongoing service and has nothing to do with the renewals being paid!
Unless the client had engaged with the adviser and the FAP after March 2021 and before the complaint, there is no ongoing service agreement in place.
In response to FSCL's "Insights for advisers":
How exactly do I ensure that the policy meets the client's needs if the client does not respond to contact?
Payment of accumulated premium and need for cover are two different conversations. One does not preclude the other, but neither informs the other.
As a colleague pointed out, paying a general insurance premium over time worth more than the insured items is possible. Still, we don't see this as a reason to ask for money back because the risk wasn't realised.
Great, the adviser wrote a good letter, apologised and is committed to improving their processes.
That's what their insurer told them to do to button this up and make it go away.
And we're all committed to improvement; that's what happens when you hit the real world.
If you're not using AI to help with writing these sorts of letters, you're doing yourself a disservice.
While I would prefer to avoid a parent or grandparent having this experience, I also do not see the professional advice issue here.
My only conclusion is that either it doesn't exist, or FSCL needs to provide sufficient background facts to demonstrate that the adviser had anything to do with this.
From my own experience with family, you can tell them, and you can have the conversations, until they themselves decide there is something that needs doing, and nothing changes.
Let's consider for a moment that the adviser had done a review in the last three years; if the client had stated they were happy with their cover and the premium they were paying, would the outcome be any different?
Nope, but there would have been more weight to the adviser having serviced the client, and there would have been less grounds for any complaints.
Reading the report from FSCL, I get the feeling the family drove this either on principle or for financial gain, neither of which had a basis for a professional complaint with the facts we have been presented.
The client's comments suggest that they saw value in the policy at the premium they were paying.
Going the other way, I have to raise the question of client vulnerability around where the money is? The money from the insurance company settlement with the family clearly driving this.
At the end of the day, FSCL, while looking at the facts of the case they have provided with the case study, should have said to the client that there is no basis for a professional complaint.
This is because:
The policy pre-dates any financial advice rules for a DRS to take a complaint.
The policy, when taken, was fit for purpose, that has not been raised as a problem.
The FAP doesn't have a service agreement with the client, as a review in the last three years clearly has not been done.
The client has not engaged with the offers to review their cover from the insurer at the very least.
The insurer has come to the party in this complaint, and rightfully so if they have settled the complaint largely to the client's satisfaction.
I still have my challenges with the costs of cover complaint when the contract appears to be underwritten YRT cover. Because you didn't die, the premium should be refunded? It doesn't work like that.
However, when it comes to the professional advice issues, the client, while aggrieved and upset, can also be the responsible party for their own situation.
Unfairly blaming an adviser with this set of circumstances does nothing to improve the attitude of advisers to complaints processes, nor does it bring forward the genuine cases that need consideration.
If anything, cases like this given air create some of the very stereotypical views the public has of our industry.
