Watchdog 'demands fairer deal for insurance customers'
Published On 3 May 2007
A leading consumer watchdog has strongly criticised the way many insurance companies deal with claims, saying that small print can easily distort the cover consumers think that they are getting.Which? revealed earlier this week figures which show that 20 per cent of critical illness insurance claims were rejected in 2005 because insurers said claimants had not disclosed previous medical conditions. The watchdog said that this proved just how hard it can be for consumers to get the money they believe they are entitled to after falling ill.
In fact, Which? said that something as simple as failing to disclose a visit to a doctor because of a headache could, in some cases, invalidate a consumer's critical illness policy.
"It's easy to assume that if you take out insurance you're protected if things go wrong, but check the small print carefully and make sure you understand what is and isn't included before you buy – or you might find it's worthless," warned Malcolm Coles, the editor of which.co.uk.
Similarly, Which? said that payment protection insurance (PPI) - which is supposed to pay money when a claimant cannot work through injury or illness - often excludes two of the main causes of absence from work, namely back pain and stress-related illnesses.
Overall, the watchdog said that PPI insurance had one of the poorest records for successful claims. In 2005, the amount of money paid out in claims was just 20 per cent of the premiums insurers levied.
The Post Office supported Which's warnings about PPI, and added that consumers needed more education about the product so they could judge for themselves whether it was appropriate for their particular circumstance.
"Many customers have little understanding of PPI and some do not even realise they have this insurance in force," explained the Post Office's head of communications, Claire Oldstein.
"Others, who have been at the hands of aggressive sales tactics, can feel they have no choice but to take the expensive policy tied to a loan or credit card if they want their application to be accepted."
Indeed, the Financial Services Authority (FSA) recently revealed that it was unhappy with how customers were sometimes treated by people cold calling to sell insurance products.
The FSA said that it found that the standard of calls was "poor" and some insurers needed to ensure they worked to treat customers fairly.
"The quality of cold calling in general insurance sales was disappointing – consumers were pressurised and the benefits of the product were sometimes exaggerated," the FSA's director of retail themes, Vernon Everitt, explained.
"The bottom line is that firms must never pressurise consumers into making a rushed decision and must always clearly spell out the nature and limitations of the products."
Ms Oldstein echoed the FSA's sentiments, saying: "If we want customers to trust our industry, these aggressive sales tactics must cease to allow for a more transparent and fairer marketplace."
However, a leading insurer, Standard Life, recently revealed that it had worked hard to improve its record on how many critical illness claims were paid. The company revealed that it had rejected 7.5 per cent fewer claims in 2006, when compared to the year before.
