Should providers write to clients more frequently?

We all seem to be the victims of data overload, but there are some areas of the financial services world where there appears to be a dearth of information.

A case highlighted by a consultant (Ramesh Thakrar) at Retirement Solutions this week shone a light into an information blackhole in the protection world. One of his clients recently discovered a forgotten individual permanent health insurance policy which he had bought 16 years ago through another adviser. He had paid all the premiums to date and had never made a claim.

Unfortunately, the client was made redundant a few years ago, but as he had forgotten about the policy and was between advisers at the time, he failed to inform the provider, Phoenix Life, of his change in circumstances.

The policy, with current premiums of £44.05 a month (due to index­ation over the years), was pretty inflexible, and if the client changed the type of work he did or became unemployed, then he would be unable to claim.

After the policy came to light, the client called Phoenix when he realised the policy was unsuitable for him, and asked for a refund for the three years when he was unemployed and unable to claim. He also criticised the lack of contact from the provider.

Phoenix replied saying it was unable to give a refund as he had failed to notify them of his unemployment. Phoenix stated that it is the client’s responsibility to make contact, should circumstances change, and not for it to confirm the policy is still valid. However, had the client missed a premium, then Phoenix would have contacted him.

Thakrar says his client feels Phoenix was happy to take his money, but didn’t care if the cover was valid, as long as it got the monthly premium.

However, it would be wrong to single out Phoenix as being worse than other providers, as it is not usual for updates to be sent out on these sorts of policies, or on life or critical illness plans.
Thakrar argues there should be an onus on the provider to contact the client every two or three years, to check the client is still able to claim under the policy and that it is not just a waste of money. This would ensure that they are treating customers fairly.

Providers may reply it is the responsibility of advisers to review their clients’ policies regularly, especially when they are taking trail commission. Clients must also bear some responsibility for keeping providers and advisers up to date with key changes.

However, there appears to be a gap in cases like these, where policies were purchased many years ago and have been lost between the cracks. Regulatory demands are much stricter now for advisers in terms of managing data and conducting regular client reviews, but we are dealing with a time when the regime was not as stringent.

Many advisers are reluctant for providers to bombard clients constantly with information, but maybe in this case, there could be a compromise.
 
Katrina Baugh, Editor, Professional Adviser