Calling all financial services professionals... How can we tackle irresponsible journalism from doin
Those of you who know me best know that I am hugely passionate about protection. We’re talking looney tunes crazy about it. I think this comes from when I worked as a front line cashier in a building society as a teenager and witnessed many individuals and families who had fell on hard times and were suffering financially due to events that couldn’t have been stopped by, but the fallout from could have been greatly alleviated by, the existence of some small insurance provision.
I recall the gentle, weather worn and silver framed face of the elderly retired seaman who repeatedly had to appear in court to have his eviction order suspended having been unable to pay his mortgage due to his terminal throat cancer. He had no-one in his life and used to call in just for company and found a captured audience in me. He was mortified that he couldn’t pay his debts and as the governmental support didn’t cover the full interest payment, he would visit with what he could, when he could to try not only to avoid losing his home but to maintain his dignity as best he could until his end. Very sad.
Joining the industry in the mid-nineties (I know, you’re thinking I can’t possibly be old enough! Well, I started very young!!) and after a period of interest rates being in the mid-teens followed by a deep recession; there was no shortage of horror stories of those individuals and families who found themselves in arrears and potentially facing eviction. As a traditional “old school” organisation, the branch including me dealt with it all, right to the end and the memory of it made a deep, long and lasting impression on me.
So roll on twenty years and in Mortgage Introducer recently, I read with delight the articles from my peers also pushing forward the protection agenda with the intermediary adviser community as I still do. Delight at Kevin Carr’s personal parallel with the Norwich City, Football related drunken ramblings of Delia Smith which both amuses and resonates with me. I’m then frustrated reading Les Schroeter’s article which reminds me of the unfortunate and incorrect consumer belief that insurance doesn’t pay and ponder how we can all come together to combat this. Then I sense a familiar chill of fear when reading the complete agreement with Alexander Burgess’ commentary about what the welfare state will (or will not) do for those who fall on hard times in the future especially in light of the pending changes to the support offered to home owners unable to make their payments due to losing their income due to redundancy or sickness. I then recoil in horror watching “Rip Off Britain: Series 7, Episode 13” which, in a cheap and sensationalist way, aims to create consumer indignation by undermining our industry and our advisers by perpetuating the lie that insurance is just one big rip off that doesn’t pay.
In the program they report on a case where a claim had been repudiated due to (innocent as it may have been) non-disclosure. And in the subsequent sub-segment it “helps out the nation” by suggesting that you should potentially answer your insurance declaration questions in such a way which may get you a cheaper premium which is therefore encouraging the very thing that caused their initial complaint; non-disclosure.
So I ask you - what can we do? I’m personally at a loss on a global scale but together we’ve got to be able to stop reports like this causing more reputational damage and ultimately making it harder for us to ensure that we can help families and individuals make, as Churchill said… sacrifices so small, [that they] can be protected against catastrophes which would otherwise smash them up forever.
Read on if you specifically want to understand more on the point made during the program on home insurance declarations …
For the record… the programme suggests that telling an insurance company that you’re not home during the day guarantees a cheaper premium. This is simply not true.
In overly simplistic terms ….. insurance premiums are calculated in a similar way that bookmakers calculate the odds on a horse race…. They are looking at form and past experience to predict a future outcome. There is no scientific proof that “Mr Ned” performs better on soft ground but by looking at the “track record” they can determine the probabilities of the horse winning. Similarly, insurance companies will look at the combined profile of an individual and their home and their belongings and from their past experience will determine whether that individual in that home is with that “stuff” is going to have a high propensity to claim (therefore the insurer could decline, load the premium and/or impose special terms and exclusions) or a low propensity to claim (which usually leads to a very attractive premium as these customers are king) and rate according to their risk of loss.
There is no emotion in these decisions it is a simple mathematical equation that determines the outcome which is based on many factors. To give you an example, did you know that insurance also takes into account a customer’s date of birth? And it is not always the older client that will attract a more competitive premium. Dependent on that insurer’s previous experience, it could be the younger policy holder that is predicted to be less likely to claim and therefore will be more attractive to insure.
More to the point…Facts are Facts! Reporting them any different to how they are could ultimately lead to invalid insurance policies and no one should ever risk attracting a more competitive premium on a fantasy because the policy itself will become just that, a fantasy that simply may not pay and therefore potentially may as well not exist.
Source Insurance underwrites a variety of risks. The Source panel has its underwriting built in so where it will accept, it will accept. Where it will load, it will load. Where it will accept with conditions, it will and where it won’t it will decline and/or refer which is often where our Non-Standard team will take over.
As I said at the start, I’m passionate about protection. The more complicated the risk, the more interesting it is to me. So if you do have any questions, unusual cases or just want to blow steam about the under appreciation of the insurance industry - don’t hesitate to get in touch.
