If insurers want their customers to be honest they should try treating their customers better

Fraud is immoral whoever the victim, but there is a reason that consumers don’t feel that way about their insurance providers

“A blow for honest consumers,” is how the insurance industry reacted to the Supreme Court ruling that “collateral lies” that do not affect the validity of an insurance claim can be acceptable.

One wonders whether the industry would be willing to say the same about the practices uncovered by the Financial Conduct Authority in a report on the activities of appointed representatives (ARs) paid to sell – or should that be mis-sell – its policies. I rather doubt it.

The timing of the release of the FCA’s “thematic review” into ARs could hardly have been more perfect, coming just two days after the Supreme Court’s ruling.

If the industry wants to understand why people don’t see any problem with lying to their insurers, the review provides them with one. It just might be because of the incidences the watchdog found of insurance salesmen who don’t see any problem with lying to consumers.

Appointed representatives are people hired to sell insurance by other companies, usually, but not always, insurance brokers. These “principals” are supposed to take responsibility for what their ARs get up to.

The FCA found incidences of shoddy practice at more than half of the 15 firms it surveyed. In some cases that practice went beyond shoddy and became sharp leading to people being sold policies that were worthless to them, which they weren’t eligible to actually claim off, which they didn’t understand.

By now you probably know the drill: Dodgy salesmen going off script. Automated menus that didn’t work properly. Falsified documents. Vulnerable customers being pressured to buy useless products. Two firms have been told to commission reports on their operations that may lead to disciplinary action.

But, but, but that isn’t us, parts of the industry will doubtless cry at this point. That won’t wash. For a start it’s cheap to wash your hands of practices you know are going on and that you benefit from.

More to the point, this is by no means the first report exposing bad practice in the insurance industry. If you look back through the archives of the FCA, and through those of its predecessor the Financial Services Authority, you will find similar reports covering other parts of the industry.

And that’s just the out and out malpractice. For too many “honest consumers“ just filling legitimate claims can be a miserable experience. I hear from them all the time. I have been in that position.

The case the Supreme Court ruled upon doesn’t involve a typical consumer. It revolved around a Dutch cargo ship, which found itself in difficulties after its engine room was flooded.

The owners were found to have lied by saying their crew couldn’t investigate an alarm, because the ship was rolling in heavy seas.The accident was caused by bad weather, which led to court to decide that the lie was irrelevant to the claim.

Could it really push up premiums across the industry? Depends on how the judgement affects the mass market. Insurers are currently considering its implications.

Regardless, I understand that filing dodgy claims pushes up the price of premiums and I don’t believe fraudsters should be allowed to exploit anyone, up to and including insurance companies. Crime is crime.

However, it is because of the bad behaviour and bad practice of the type highlighted by the FCA’s report that people don’t see ripping off insurers as at all immoral. Until the industry recognises that and does something about it, the prevailing attitude will be “if they’re allowed to rip us off why shouldn’t we be allowed to rip them off”.



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