As risk advisers we specialise in protecting our clients, but protecting our business is important too.
I received a phone call from an adviser last week whose client's claim was declined (replacement cover) due to non-disclosure and the adviser received a letter from the client's lawyer.
The adviser did nothing wrong and all the advice was sound. What has been called into question is the statement of advice (SOA) not highlighting the new legislative changes to the non-disclosure rules (three-year rule no longer applies).
The adviser requested I highlight this issue to the group to avoid any of us going through the same thing. Check your SOA and make sure it is clear in relation to the consequences of non-disclosure.
Here are some suggestions to help you protect your business that we use every time:
1. Have a separate duty of disclosure sign off document that highlights the client's responsibility and consequences if they do not disclose.
When I ask the client to sign it I say this, "I know I give you many documents that aren’t vital for you to read, this is not one. I need you to read it and we'll talk about it after you've read it".
I then sit quietly while they read it, and once they sign it I then discuss what it all means in the real world. I reiterate that their duty of disclosure continues until the underwriting process is complete.
I say every time, "If you're wondering should I or shouldn't I tell the insurance company? The answer is 'Yes, you should'. Tell them everything and let the insurer work it out". This ensures no one can ever say they didn't understand or that it was included in a 50-page SOA which I didn't read.
It is easy and creates an element of trust between you and your client because they can see you are trying your best to ensure a claim is paid. Which you are.
2. Best thing we do is, when we are replacing cover.
The application has been accepted and the old cover needs to be cancelled we arrange this for the client (which they love).
We ask them (I go out and see them with this document) to sign a cancellation authority that has in bold type a reminder that they have been bound under the duty of disclosure for the time from the application being signed until now and that they understand this and that there has been no change in their personal situation.
I ask them to read it before signing it, I sit quietly while they do and then verbally confirm that nothing has changed. This again gives you piece of mind and also will (and has) bought up issues they had forgotten about. Let’s remember, the best way to protect ourselves is to have clients claims paid every time.
My Dad said to me when I first started 20 years ago, "Do the right thing by people and you can't go wrong".
After he'd retired I was talking to him about these types of issues and I reminded him what he'd said and I said, "That's not true anymore, is it?" and he said "No it’s not, now you should do the right thing by people and have proof that you have".
Ben Day is a specialist life insurance adviser at Fitzpatrick Financial Services and a director of consultancy Risk Sales Tools.
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