Customers face harm from closed-book providers with no incentive to offer good digital services
I woke up one morning a couple of weeks ago to find that – along with 200,000 other consumers – I had been sold! It is not a good feeling.
I am one of the policyholders Quilter sold to Reassure as part of the disposal of its closed-book business. Although, after investigation it appears Quilter has sold rather more than that – which may actually be a good thing.
When you realise this is happening to you it suddenly makes you think in far more detail about the transfer of ownership of policies and what it means for customers.
Looking back over the last 20 years it’s hard to think of any situation where transfer of ownership of regulated life and pensions contracts to a closed-book operation has resulted in anything but a poor outcome for consumers. Invariably the end customer is worse off both in terms of diminishing returns – there is no incentive to perform well – and poorer customer service.
Online discussion groups for advisers are littered with conversations around appalling service from closed-book providers who don’t want to provide any level of information on contracts. When did a closed-book provider ever invest in online services to provide consumers or advisers with better access to the value of their investments or the current benefits of their life policies?
Any organisation not now offering such services is actually committing a gross General Data Protection Regulation breach because under the regulations organisations must store a consumer’s information electronically to make this available to them in an easily consumable digital format. This is the same obligation as the Department for Work and Pensions identified in its recent work on pension dashboards which leaves many pension providers exposed to enforcement action by the Information Commissioner’s Office.
Maintaining service
Let me be clear I have no problem with the idea of a policy being transferred from one organisation to another, but the receiving company must commit to providing and maintaining the same level of service as the consumer could expect from the ceding company. Going forward this will definitely include the provision of online services in order to meet the needs of the emerging open finance environment, which the FCA is just starting work to deliver.
When you think about it the vast majority of companies who have acquired customers this way work on a basis where daily breaching of treating customers fairly principles is central to their economic and operating model.
It is hard to understand why the FCA, which would never accept such behaviour from a life office or platform operating in the new business market, has been so weak in enforcing its rules on closed-book providers. I believe it is time for the regulator to address this as a matter of some urgency.
Real consumer detriment is taking place on a wholesale basis yet it has gone unchallenged by the regulator. I can’t help but think it is time for those customers to be compensated.
While being one of the customers ‘sold’ has made me focus on this subject, my views on this are not restricted to the Reassure/Quilter transaction, I think there is a need for an urgent regulatory review of all closed-books sales ast, present and pending to assess the impact on consumers and if there is a case for redress.
In the case of ReAssure/Quilter much of the above may, in reality, not be an issue as Quilter has confirmed to me that not only has it sold the closed-book contracts but also the new business operation – which has up to now been known as Old Mutual Protect. As an ‘open’ provider I would expect whatever the new entity is called to continue to invest in the high levels of service and digital connectivity that are a key part of any insurers proposition if they are writing your business.
Contracts and compensation
Personally, I can see a clear case for compensation to closed book customers being treated in the same way as PPI – in effect, the detriment should be calculated and the offices forced to pay compensation to all policyholders.
In the case of life policies and particularly critical illness cover there is a further issue to consider. Although it’s not widely recognised many of the policy wordings used in old contracts are no longer fit for purpose due to advances in medical science and changes in medical practice. Insurers are aware of this and frequently pay out on claims which, while technically not covered under the policy definition, are still paid in line with the insurer’s ‘claims philosophy’. The problem with this is it is at the discretion of the insurer.
For companies actively seeking new business their attitude to claim payments protect the consumer. But it is not a right. In more difficult economic conditions insurers might be less generous.
With the UK staring a deep recession in the face as a consequence of Brexit this becomes more concerning. When you are thinking about a closed-book provider without the incentive of needing good relationships with the distribution community it’s not hard to see they might take a far harder line.
This raises serious questions if a closed-book life policy gets transferred to a new owner should the adviser be reviewing the wording and considering a switch to a more modern policy to better protect the customer?
Overall, I am convinced it is time for the operation of the closed-book market to be subject to far more scrutiny, both from the regulator and the wider market.
You can follow him on Twitter @ianmckennaftrc
Look at what happened to Childrens Mutual that got “moved” to Forresters , with promises that nothing would change from the clients point of view or from the advisers!!
“With the UK staring a deep recession in the face as a consequence of Brexit ….”
I suppose if you say things often enough, fools will begin to take such statements at face value and they will then become self-fulfilling prophecies.
So, the reason that Germany, France et al are also on course for a recession will be solely down to Brexit and nothing whatsoever to do with other global macro-economic and political factors – such as US tariffs, China, burgeoning global debt, etc.
Interesting to note that, “despite Brexit”, UK tech companies secured a record £5.5bn in foreign investment in the first seven months of this year – more than the amount invested per capita in the US tech sector over the same period.
Just a little weary of lazy journalism that betrays political bias.
Whilst I agree that closed-book companies tend to offer poor service and their websites are basic, at best, can Ian explain why “compensation” is due?
For what? Needing to phone for valuations rather than see online?
Poor investment performance? Can he prove that? What data does Ian have? And can we therefore all claim “redress” for open funds that have performed poorly? If not, why not? Why only closed-book funds?
I assume Quilters are offering a penalty-free transfer if Ian doesn’t want to be sold to Reassure? If so, why not just do that?
Finally, may I request Ian stops bringing politics into a technology article? His negative predictions of Brexit outcomes are becoming regular. Nobody knows what will happen after 31 October and there are wildly different opinions. I have no idea, but I do know thus is a financial magazine not a political one…,please avoid politics (like religion) from future articles. Thank you.