A process in need of renewal

My own experience tells me the group risk process is not fit for purpose, says F&TRC director Ian McKenna

The UK life and pensions industry is not generally known for innovation but there is one area of the market where accepted levels of service from some insurers are nothing less than disgraceful. I refer of course to group risk.

That is not to say that some insurers have not distinguished themselves – Legal and General’s long terms project to upgrade its group risk technology should by now be beginning to pay dividends for advisers. Canada Life took a huge step forward with Class some years ago although in my view they need to make more continuous investment if they are to maintain the benefits.

One insurer stands head and shoulders above all others when it comes to the effective use of technology to transform not just the process but also what group risk propositions can deliver. I refer of course to Ellipse. Yet the above are exceptions not the rule.

I recently had my annual reminder of this fact when the renewal date arrived for the group risk policies we use to protect our own staff.

After years of appalling service I decided it was time to lodge a formal complaint. I won’t name the company, but here is what happened. The response received noted that “The time taken to produce the accounts in previous years appears to have varied from 2.5 weeks to 11 weeks, with the exception of the 2006/07 renewal”. To clarify, although the company responding clearly wanted to avoid acknowledging it in writing, 2006/7 was the year when it took 19 months to produce renewal papers.

The response went on to explain “It is important to note that (name redacted) are unable to produce our accounts prior to the renewal date.” Despite the above and other failings the complaint response ended in saying that “I believe that have acted in a fair and appropriate manner when dealing with requests and in line with our processes and procedures with the exception of the 2006/07 accounts as previously mentioned. I am therefore unable to uphold your complaint.”

I recently asked the FCA press office to confirm the current regulatory requirements for policy renewals. They directed me to ICOBS 6m, pointing out specifically;

ICOBS 6.1.5 “A firm must take reasonable steps to ensure a customer is given appropriate information about a policy in good time and in a comprehensible form so that the customer can make an informed decision about the arrangements proposed and ICOBS 6.1.6 “The appropriate information rule applies pre-conclusion and post-conclusion, and so includes matters such as mid-term changes and renewals. It also applies to the price of the policy.

If a company cannot provide renewal information before renewal date it appears to me that they may have a systemic breach of the above rules.  Failure to deliver renewal papers in good time of course makes it far more difficult for advisers and employers to explore alternatives. Presumably the main reason the FCA requires such documentation to be supplied promptly and perhaps the reason the insurer involved does not appear too concerned to address this failing.

Equally having a process that cannot provide renewal documentation before renewal seems to me to run contrary to TCF principles 1, 3 and 6.   

Even if it were only an extreme case, which I am assured it is not, I believe this demonstrates that the traditional group risk renewal process is no longer fit for purpose. It results in a level of customer service that damages the credibility of the whole sector.

The data requirements for processing auto-enrolment mean employers are required to supply nearly all the data to process group risk business. This should represent an opportunity to transform how group risk renewals are processed and deliver a far better customer experience but at this time there appears to be no cohesive collective effort to address these issues. 

It is only fair to recognise that Grid has tried to facilitate better practice but any voluntary structure can only encourage good practice. In this instance a small group of laggards are undermining progress. It has taken just a few months for the FCA to demonstrate a fresh approach to regulation being far more pragmatic and practical than their predecessor.

I never understood why the FSA took no action to improve the appalling service levels endemic in the group risk market, but I believe that there is now an urgent need for the FCA to investigate this sector of our industry.

Whilst it is important to give credit to those insurers who have improved their process, market competition is not proving sufficient an incentive for others to address their failings. Against this background it appears a regulatory intervention may be the only option left to protect consumers.