Sweet smell of success?

It is now almost a year since the publication of the ABI Guidance on Non-Disclosure and Treating Customers Fairly and it is a good time to reflect on how well it is working from a complaints perspective. Has the guidance led to a drop in the number of complaints about long term-protection insurance? And are fewer complaints being upheld?

I am pleased to say that the answer to both of these questions is 'yes'. Since January, the Financial Ombudsman Service (FOS) has seen a steady quarter-to-quarter drop in complaints relating to medical non-disclosure in long-term protection insurance. Furthermore, compared with the previous year, the uphold rate of complaints since the guidance was published is significantly lower.

So what is working well in practice? It is clear that there has been a sea change in attitudes among insurers. Gone is the old ‘avoid first, ask questions later’ approach to non-disclosure. Insurers are now investigating why it occurred before deciding whether to avoid paying and asking customers for explanations for any discrepancies. As a result far fewer policies are being rejected outright and more proportionate claims are being paid.

Also, insurers are being more careful about what medical evidence they obtain and are trying to prevent being seen to underwrite at the claims stage. This dubious practice, it seems, is finally out of favour. Insurers are taking a much more targeted approach to medical evidence and asking doctors for limited information relating to the claim itself. Insurers must justify wider requests, and ‘trawling’ through full medical records without sufficient pretext is now almost always unacceptable.

The industry’s early concerns about the FOS applying the guidance retrospectively have proved to be unfounded. In fact, it has been the industry itself that has applied the guidance not only to all claims ‘in the pipeline’, as the guidance suggests, but also to existing complaints being dealt with by the service. Most insurers have recognised that the guidance essentially reflects how the ombudsman service already approaches non-disclosure complaints and are tailoring their submissions appropriately. Where the guidance goes beyond its existing approach, most notably in the area of obtaining medical evidence at the point of claim, the FOS recognises that this aspect of the guidance should appropriately apply to those cases that fall squarely within the time parameters of the guidance.

But surely the picture cannot be all roses? Of course, with any major changes in practice there are bound to be teething troubles. For some insurers, the guidance has required a wholesale reinvention of its approach to claims. Such changes take time to bed in. Over time, as everyone gets used to the concepts involved, insurers will become better at anticipating how the FOS might view a particular issue.  This should lead to fewer disputes arising and a reduction in non-disclosure complaints being referred to the ombudsman for determination in the future.

Melissa Collett is insurance ombudsman at the FOS