We are a consumer champion
British Insurance has for many years been at the forefront of campaigns to secure better deals for consumers. They pride themselves on their high ethical standards, their desire to make Redundancy Insurance accessible and affordable to all and their determination to rid the industry of jargon, small print and excessive exclusions.
Before purchasing any type of insurance, they fervently believe you should understand what the cover provides and know how it works, you must be given the tools to assess whether it’s suitable for your circumstances and via the provision of clear information, such as cost per £100 of benefit, be able to easily calculate what your monthly premium will be. British Insurance also believe providers should make the purchase of this cover as simplistic as possible.
In 2005, they began a campaign to change the way Redundancy Insurance cover was marketed and sold, using the power of the media and applying pressure to trade bodies and consumer groups. At the time, there was compelling evidence that consumer detriment was widespread and all stakeholders were in dire need of a spokesperson to ‘champion’ their cause.
Providers themselves needed an advocate as consumer confidence began to plummet, amidst widespread allegations of policy mis-selling, high levels of rejected claims and exorbitant premiums. British Insurance used the media to highlight that although, there were some firms who were not treating customers as fairly as they could, not everyone should be ‘tarred with the same brush’.
Given Redundancy Insurance policies can help prevent people spiralling into debt if they lose an income, it was vital consumers were aware there were more ethical companies who could indeed provide a financial safety net that would pay out in times of hardship. There was also a need to make consumers aware of the mis-selling issues and offer advice on how to tell if a policy had been mis-sold and where to go for redress.
British Insurance stepped up to the mark and endeavoured to challenge those who were damaging the reputation of others and inform consumers about the Redundancy Insurance (as it’s also known) debate, plus advise and guide them on the best way to purchase cover. To do this, they dominated national, regional and trade newspapers and magazines and regularly appeared on the radio and television.
So why did British Insurance become a fervent consumer champion? They are giving you a potted history of the issues affecting the sector in order to explain why it’s so important for them to protect consumers and ensure their best interests are placed firmly at the heart of their business.
In September 2005, the Citizens Advice Bureau lodged a ‘super complaint’ (meaning it had to fast tracked and investigated immediately) to the Office of Fair Trading. This was in response to an increasing number of complaints from consumers who were either unable to claim on Redundancy Insurance policies or who felt they were paying too much for their cover.
The CAB’s complaint was based upon evidence collected in its 2005 ‘Protection Racket’ report which indicated features of the Redundancy Insurance market were seriously harming the interests of consumers. It found issues with over-pricing, product design, irresponsible and pressurised sales and claims administration and concluded that Redundancy Insurance was failing those who need it most, adding to their debts instead of protecting them against hard times.
This was not surprising, given lenders had the market monopoly. They collectively enjoyed an 80% market share and as is the case with any sector that’s weighted in favour of one distribution channel, anti-competitive practices soon emerged.
By the first half of 2006, the OFT concluded consumers were repeatedly unable to claim on their policies, indicating they’d been mis-sold them in the first place, commission rates were too high, resulting in exorbitant premiums, there were vastly different prices for similar products and sales were consistently linked in with the provision of credit, giving consumers the impression the purchase of cover was a condition of their loan.
The OFT also found issues with complex products, poor levels of information, misleading APR rates (Redundancy Insurance was excluded from the advertised rate and added in once the credit was agreed, increasing the APR) little advertising (ensuring consumers stayed ignorant) and the afore-mentioned point of sale advantage.
Such was the seriousness of the Redundancy Insurance market failings, the OFT referred the sector to the Competition Commission. In February 2007, the CC began their investigations and over 18 months published a series of documents, interim reports and working papers, asking Redundancy Insurance distributors for their feedback. It is here that British Insurance was instrumental in lobbying for sweeping changes that would change the distribution landscape of this sector.
Alongside these investigations, the Financial Services Authority undertook its own research and began to fine those it found had mis-sold Redundancy Insurance and the Financial Ombudsman Service (FOS), added its weight to the mis-selling debacle by voicing concerns over the high incidents of inappropriate sales.
In January 2009, the Commission published its remedial measures Final Report.
Recommendations included; a ban on lenders selling Redundancy Insurance at the time a loan is taken out and for 14 days afterwards, a ban on the sale of single premium Redundancy Insurance policies (where the overall cost of the policy is added onto the loan amount and interest charged on both), a requirement for lenders to separate out the Redundancy Insurance quote from the loan offer, the inclusion of more Redundancy Insurance information (such as price per £100 of monthly benefit) and the provision of information to the Financial Services Authority for the compilation of premium comparison tables.
The Recommendations were set to become mandatory in 2010; however, some High Street Lenders went to Appeal. As a result, the recommendation to ban lenders selling Redundancy Insurance at the time a loan is taken out now has to be reconsidered by the Commission.
In the meantime, British Insurance will continue to lobby for greater consumer choice, advocate transparency and encourage providers to follow its example and offer easy- to-purchase policies with competitive premiums and all-encompassing cover.
