Last month, I covered some of the outstanding matters raised in the IP Task Force White Paper that need to be resolved in order to remove any potential consumer detriment at claims stage for income protection (IP) insurance.
The White Paper also addresses wider consumer fairness issues for example, it proposes a kite-mark (itself a heavily protected term) of products that meet certain criteria so that consumers and advisers can easily compare products, and it can be made clear what is and is not IP insurance.
Progress has so far been dogged by disagreements between different companies about the level of collaboration that is desirable but there is a way through this without requiring all companies to sign up. That is to make kite-marked IP comply with an Office of Fair Trading- (OFT) supported Code of Practice.
The OFT issued guidance in 2008 on what it expects of Codes and their expectations do seem to fit well with the Task Force’s recommendations. Here are some of the key OFT requirements. First, Code sponsors should have a significant influence of their sector. This is not a market share test, the guidance allows for competing Codes. So here we have an opportunity for the most progressive insurers to band together even if agreement cannot be reached across the whole industry. It is only mandatory for those who sign up to it.
Second, Code sponsors must be able to show that consumer organisations have been properly consulted. The introduction to the White Paper was written by Which? and their support to a Code would be important.
Third, the Code must ensure that consumers are protected from misleading advertising. This would address concerns about products which are labelled as IP but are actually old-style PPI. These would not be kite-marked.
There are also some other challenging, but probably welcome, aspects of achieving Code status. First, Code sponsors must protect vulnerable customers. This could be achieved through tele-underwriting at application stage and going the extra mile in implementing the Equality Bill provisions.
Second, they must develop performance indicators including independent mystery shopping exercises and audits to measure the Code’s effectiveness. Mystery shopping could be carried out by Which? or contracted to a specialist provider. An audit would include publication of claims statistics – including proportionate payments, which is where the greatest number of IP complaints arise.
Third, providing an annual report on compliance with the Code to the OFT. This could be carried out by the Task Force and could also be supported by Which? and the FSA. Finally, Code sponsors must make customers aware of the Code. That means marketing and could be part of the campaign currently being facilitated by this magazine and Lifesearch.
The IP market is developing rapidly to meet the protection gap caused in part by the OFT’s report on PPI. Now is an ideal opportunity for progressive insurers and advisers to kite-mark the best products and services with the support of the OFT and Which? and make a step change in levels of consumer cover and confidence.
Richard Walsh is managing director of SPPR Consulting
