Better consumer information on the way

Whatever the final outcome of the Insurance Distribution Directive (IDD), end-users will be better informed on the insurance products they are buying.

Consultation may yet modify the FCA’s suggestions but the broad concepts will remain and apply from pre-purchase to after the end of the contract:

• know your customer
• know your target market
• facilitate product comparisons and avoid competitive distortions
• provide Insurance Product Information Document (IPID)
• protect customer’s money
• no conflicts of interest

Achieving all these objectives requires a holistic approach within the organisation and then again when the product is retailed, bundled or distributed. Point of sale is of course the most crucial aspect but IDD will impact on product design, sales, HR, data security and many other areas.

The consumer must first be presented with a clear choice that meets their needs and, second, be provided with something that lives up to their expectations.

The new IPID must be in a durable medium, such as on paper, and contain objective details of the product and exclusions. It must be available for renewals and bundled packages where more than one IPID may be needed. Though brief in content, it must give sufficient helpful information to inform the customer’s choice prior to them concluding the contract. It will be up to the retailer to decide the point at which the information is most appropriate to aid that choice. 

Get it wrong and it will of course count against you in ombudsman decisions.

Making the most of BTE

A recent report conducted by the Legal Ombudsman considers two key points in the run up to LASPO’s implementation. Firstly, how before-the-event legal expenses insurance (BTE LEI) is going to fill the gap and secondly how well it is currently placed to do so.

As reported in Litigation Futures, the report commissioned a YouGov questionnaire which found that while, “40% of those surveyed had some type of legal insurance cover”, 74% of these were “unsure or didn’t know what financial cover their policy provided.”

“Concerning” was the word coined by the Chief Legal Ombudsman, Mr Sampson and perhaps rightly so. As a legal expenses insurer we know that we provide high-quality BTE LEI products that are designed around the customer’s needs. We work hard to make our policies understandable to the masses, following the FSA guidelines and provide training to the brokers who are on the front-line selling our products. There are no secrets; it is all down in black and white with Keyfacts in both the point of sale and policy wording.

However, for most it is currently sold to them as an add-on product which tops up the cover they receive in their main insurance purchase, for example car or home insurance. Already there is a barrier as it is likely that the LEI is buried within the main policy wording. Before I started working in insurance, I would simply skim the wording and make sure that the key areas were covered and then hope that I wouldn’t need to make a claim. I am much more conscious now of checking carefully, but I think this is minority when it should be the other way around. Saying that, if I did have a legal issue and needed to consult a solicitor, if the solicitor is doing their job properly they should discuss with the client their insurance details and investigate if BTE is available. After all, you only need the policy at the time of a claim.

Therefore, perhaps it is a general education of the benefits that is required. As found in the survey only 40% of those asked had LEI, in Germany for instance 60% of the population have some form of LEI. The report acknowledges that “legal expenses insurance is beneficial for the simple reason that it’ll continue to allow people to take legal action when they would not otherwise have been able to afford it.”