Advisers 'fighting a losing battle' over fraudulent appointed representative activity

Protection advisers have sounded the alarm over an increasing volume of ARs using fraudulent behaviours to sell protection policies that offer worse levels of cover with potentially worse outcomes for consumers than those that were already in place.

CoverMyBubble director and founder Emma Astley recently took to social media to detail how one of her clients had been contacted by an AR claiming to represent her insurance provider, only to then proceed to sell a policy from a different provider that offered cover less suitable to her needs.

Speaking to COVER, Astley details that following the call, the client contacted her to explain what had happened: "She gave out her details and feels silly for doing it, but the reason she's so angry is because of the way they do it. They never have her a policy number or the name of the provider she was with.

"They just said ‘We're your insurer, we're here to give you a review and save you some money, so give us your details.' He just kept pestering her, didn't stop speaking and ended up going through an application with her. It was at the end where she thought: I'm done, something's not right."

Using such high-pressure sales tactics on consumers who either believe this outright or become flustered into divulging their policy details may not be fraudulent, it is certainly predatory, all while being vague enough to mask the intent behind the call.

Other rogue actors, however, present themselves to customers as calling on behalf of a specific insurance provider - a falsehood that moves this activity from predatory, albeit legal, to fraudulent.

Following Astley's post on LinkedIn, other protection advisers and market participants chimed in with their own experiences, one of whom was Plus Financial Group commercial director, Matt Chapman, who said this type of rogue activity is "symptomatic of a declining protection market."

"We're in an economic crisis and people are struggling with premiums, so these firms aren't getting as many referral opportunities as before," he explained to COVER. "They're having to resort to these very unpleasant tactics in trying to convince people to take business with them."

Having had clients with similar experiences to that of Astley's, Chapman questions where these ARs are getting the information they need to make such calls to policyholders, while advisers are left to pick up the pieces and repair the damage done.

"If [advisers] were to replace someone's cover with one that wasn't suitable, not to check if they were vulnerable, not taking into consideration any individual needs, and then putting them in a position where we recommend plans that were subpar - or worse than what we've replaced - we would have just been hung drawn and quartered," he says.

"Yet these firms operate with impunity and nobody seems to be able to stop them. They're setting up businesses, disappearing and then the same directors just set up other businesses. For some unknown reason, the regulator seems to turn a blind eye to it."

Lack of action

Astley says that she contacts insurance providers with the information they need to take action against the ARs involved but believes a lack of resources means dedicated investigation is impossible on an effective scale.

In May last year, the Financial Conduct Authority (FCA) announced a dedicated department to tackling poor AR and principal firm behaviours, following the introduction of stricter verification and monitoring protocols at the end of 2021 for ARs.

Responding to a request for comment from COVER, a spokesperson from the FCA said: "Thanks to our tougher rules, entry standards and new reporting requirements, we have been able to take increased action against firms who manage ARs and prevent consumer harm.

"Since November 2022, we have put in place restrictions on 10 firms, including 4 in the insurance industry."

Astley acknowledges that the FCA has taken measures to better police against rogue AR activities, but also says that "more needs to be done" in tackling the harm caused.

"People want to look at insurance but unfortunately start off looking in the wrong place sometimes and go through such a terrible and pushy sales call they just come off the phone and block them," she explains. "This kind of behaviour is pushing individuals and families further away from taking out insurance.

"I feel there is still more needs to be done regarding monitoring and training by some principal firms; it's a tough job but monitoring each AR/adviser more closely will stop this from happening and agencies/registration being lost for these firms."

Consumer Duty should go some way towards addressing rogue AR firms, with stricter requirements coming into force at the end of July. However, Chapman says these practices are doing a great deal of harm to the very objectives the Duty aims to achieve.

"We're all trying to raise not just standards, but also consumer perception of what we do at the moment; trying to protect people realistically with products that are really valuable," he says.

"We're in a losing battle if every time we did something properly, someone else is coming along, using underhanded tactics and misleading people, because they destroy the reputation of our industry."

FURTHER ACTION

In its response to COVER, the FCA provided the following guidance for all protection market participants should they have information on appointed representatives engaged in fraudulent behaviour.

You can make reports here if you witnessed wrongdoing - https://www.fca.org.uk/firms/whistleblowing; call: +44 (0)20 7066 9200 between 10am to 3pm, or leave a message; email: [email protected]

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