# Have Insurance Brokers "Duty of Care" to their Customers



## JEON50 (12 Apr 2010)

I have Life Insurance with a major International Insurance company. I have a life insurance joint life which I tool out, 30 years ago, never saw the "broker" salesman since, cover about 180K. In 1994 took out a Life, Disability and Critical Innness with a broker for the same company. He stated at he time he would recommend it, it was for 55K on a 20K mortgage Top Up. I was ubable to work in 1999 and 2001, but as the policy was never explianed in full I never made a claim ( Loss about 15 months income)

In early 2007 I contacted the insurance company, complaining that I did not see the benifit of the policy as I paid the mortgage off in 2004.

Out of the blue, the broker rings stating that he can cancel the original policy, he arranged to send out a cancellation, and open a brand new life only joint policy ( CHURNING ???)

in DEC 07 I had my first stroke, off work for 16 weeks, July 2008 heart failure, July 2009 CardioMYOPHTY, August 2009 Stroke , March 2010 stroke.

HAVE THESE BROKERS A DUTY OF CARE TO THEIR CUSTOMERS OR ARE THEY IN IT FOR THE MONEY, DO THEY NOT NEED TO MEET THEIR CUSTOMERS , OR EVEN WRITE ADVISING ON THE BEST ADVISE, OR ARE THEY JUST CONCERNED WITH MAKING NEW SALES AND PROFIT. IF SO THE BIG INSURANCE COMPANIES HAVE A GET OUT OF JAIL CLAUSE - THE BROKERS


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## Dave Vanian (12 Apr 2010)

I'm trying to understand your post.   

You have a joint life assurance policy for the past 30 years.  

You have a separate life assurance policy with illness benefits since 1994.  

Did you cancel one or both of these policies in 2007?  Did you replace them with a third policy?  What did it cover?

Since December 2007, you have suffered a series of serious illnesses.  

Can you elaborate on what your complaint with the broker or insurance company is?  

Is it a broker (i.e. acts for several insurance companies) or an agent (i.e. acts or possibly works for just the one insurance company)?


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## StevieC (12 Apr 2010)

Life Assurance Brokers are obliged to give you a reasons why letter advising of why they recommend a particular policy at time of sale.

Life Assurance Brokers are obliged to give you a terms of business letter advising how to deal with them if you feel you need to make a complaint.

Life Assurance Brokers are not obliged to call/write/meet you every year after selling a policy.

Life Assurance Brokers will not know that you are ill and possibly entitled to make a claim unless you tell them.

"Churning" only happens if a broker advises you to cancel a policy and start another one if it is against the interest of the customer. If a broker realises that insurance rates have decreased and he can get you a replacement policy that has the exact same benefits (or better) at a cheaper price, then obviously this is in the interest of the customer and does not constitute "churning".

A brokers job is to evaluate your insurance needs (unless you know them and take out an execution only policy) and find you the cheapest price on the market from the companies they deal with. There is no duty of care to follow up every policy holder every year, there is only a duty of care to give advice if they are asked for it after the policy is set up (ie. if a person contacts to ask if they have grounds to make a claim).


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## JEON50 (14 Apr 2010)

Yes, I have 2 sepetate policys, with the same insurance company, with different agents /brokers, joint life with " A cold call to the door" in about 1984, which is fine have paid premiums every month since, no problem.
The second "Agent"arranged a mortgage top-up in 1994 of 20K, and recommended a Life Disability and Critical Illness, which was very expensive, maybe 120/month compared to New Ireland for Life only at 13 per month.
I asked the agent to try reduce my premiums in 2007, so he signed me up to a "Permanent Health and Life", WITHOUT PERMANENT HEALTH" I am 51 years old, my time is short, BUT these guys are as bad as the banks, WHERE IS THE REGULATOR , how do we stop these sharks ? Brokers?Agents?


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## EMG (15 Apr 2010)

Insurance Brokers or at least a good one should arrange annual reviews every 1 to 2 years.  yes it might be a pain meeting up with your broker and going through Life Insurance details, but it could mean that you have the correct cover for your personal circumstances.  So yes  to answer your question, (as a Broker) i Feel that we do have a duty of Care. Hope this helps. Emma Gollogly


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## Barbie doll (11 Jun 2010)

Dare I say that brokers are only sales men who are there to make a commission and meet their sales goals. That's it. My advice is to take their policies and speak to a solicitor, before you sign anything. You will never understand the legal jargon, in their prospectus and they like it that way.  That way you wont miss out on the small print.


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## tenchi-fan (11 Jun 2010)

What do you want, the broker to hold a gun to your head and make you take out expensive policies?

Yes, their livelihood is made from selling products. However, it is in your best interest to contact the broker particularly if you have a change in circumstances.
You paid off your mortgage so wanted less cover.. but exactly how much cover do you expect for €13 per month?

If I went to a broker tomorrow they'd sell me a phi policy because i don't have phi at work. They'd also advise me to increase my life cover, get a lot more specified illness cover, increase my pension contributions and save a bit more. The broker would make a fortune and I'd be well covered. I'm just not willing to pay that much!


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## JEON50 (12 Jun 2010)

When i cancelled my PHI, which I started in 1994 it was costing approx. Euro 60 per month. When I changed to life cover, in 2007 it was costing over 220 per month, self employed I know i should never of changed it. I was out of work due to ill health in 1999 and 2000, in total between hospital and home about 10 months. I never made a claim, as the broker never explained the policy, but I was paying the premiums. I should have gone with the Euro 13 per month


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## Sumatra (15 Jun 2010)

Churning is alive and well these days.

If you get a quote from some online brokers and don't do business with them they will contact you the following year offering a discount to get you to move over to them. Problem is the policy you are offered will have a higher base premium than the one you currently have (one is lead to believe that this is a no no from the regulator). You see some of these guys are playing on the consumers ignorance and treating life assurance products the same as general branch products and as we all know both branches are not dealt with in the same manner. 

Some of the larger mortgage brokers during the boom years for the sake of convenience would have placed business with shall we say a less competitive provider (higher premium = higher commission) and now they are cash starved and are going or have gone through their book of customers to rebroke it with another company. So these guys are being rewarded twice. Once for selling a more expensive policy because the could justify it on factors other than price and now they rebroke it with what they should have done in the first place and are rewarded by another 100% commission + uplift again. 

I believe the dishonest ones will be weeded out but a system that is rewarding this type of practice is flawed. In the interests of integrity in the market the insurers need to get rid of up-lift and get rid of upfront commission favouring spread commission.


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## StevieC (16 Jun 2010)

Often what some consider churning isnt.

Example 1 - A client rings broker and says they have paid a sum off their mortgage and wonder can cover/premium be reduced. Due to the nature of term assurance/mortgage protection policies, the details of them cant be adjusted. The broker does a quote and finds cover will be cheaper if client re-proposes with a new policy. Although the broker receives initial commission twice, he/she has acted in the best interests of the client and therefore the act of taking out a new policy is not churning.

Example 2 - Client rings a broker to say hes got a better offer elsewhere if he/she takes out a new policy with another broker. Whats the existing broker to do? Watch the business walk out the door? Most cases the broker will try to advise the customer that the new policy is dearer and retain the customer or if necessary try if possible to match the deal being offered. It may be that the base premium is higher but if a customer is dead set on this course, then the existing broker has no option but to follow their wishes. Its up to the existing broker to cover themselves by writing the business as execution only and doing a very detailed reasons why letter to avoid being accused of churning down the road.

Typically I find life assurance customers to be very savy to the market. Numerous articles have been written in national newspapers about how to save money on peoples life assurance. At a time when households are losing jobs, any saving that can be made is typically jumped upon.

I dont think that changing commission structures will make any difference to people cancelling policies and taking out new ones. Very few policies last to maturity these days (typical term of a policy is 8 years despite most people proposing for 20+). There are very valid reasons why people change policies, there is also very valid reasons for a broker to do a lot of work to find the best value for clients depending on their changing circumstances (children/separation/unemployment/equity release/early repayment).

When the economy gets back on track, less policies will be cancelled as the most common factor, unemployment, will be reduced. Penalising brokers is not the solution and will only lead to less independent advice being available. Bad brokers will be weeded out anyway when people realise that they are not getting the service/good advice they should. 

If anything I blame some institutions for selling expensive whole of life policies when a standard mortgage protection policy was sufficent for the clients needs, this is where I see the majority of people looking for better value.



www.CheaperLifeAssurance.ie


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## Sumatra (16 Jun 2010)

StevieC, you shouldn't put your name to such a post. Example 2 is churning. Example 1 is churning if the existing provider can facilitate the change. Shortly to be introduced changes to commission structures will see that you (by you I mean any intermediary)won't be rewarded for example 1 or example 2. Business you write with 'savvy' clients this year goes to broker B next year and broker C the following year. Persistancy is the only thing that matters to insurers and unless you want to end up paying your clients premiums and running at a loss you better put on your thinking cap now because from now you only have a few months breathing space.


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## JEON50 (17 Jun 2010)

Thank you Sumatra, the brokers are totally unregulated, and the insurance companies can wash their hands, as I said before most large brokers are fine, but the one off guys. just sell and churn, I suppose if I was in their situation, I would do the same , without regulations and money penalties, Why Worry


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## StevieC (17 Jun 2010)

Sumatra said:


> StevieC, you shouldn't put your name to such a post. Example 2 is churning. Example 1 is churning if the existing provider can facilitate the change. Shortly to be introduced changes to commission structures will see that you (by you I mean any intermediary)won't be rewarded for example 1 or example 2. Business you write with 'savvy' clients this year goes to broker B next year and broker C the following year. Persistancy is the only thing that matters to insurers and unless you want to end up paying your clients premiums and running at a loss you better put on your thinking cap now because from now you only have a few months breathing space.


 
Sumatra, the definition of churning implies that you are acting against the interests of the client to facilitate the accumulation of more commission. In example 2 you are acting on the express wish of the client, not advising them to do this for personal gain. In example 1 you are acting in the interest of the client, the Regulator does not view this as churning and has confirmed same.

I understand that insurance companies are interested in persistancy and not in the best interests of the policy holder, but independent financial advisors are obliged to put the interests of the client above the interest of the insurance company if the required cover can be found elsewhere at a cheaper premium if there is no impact on quality of cover.

Personally I find very few customers shop around every year and the ones that do generally have genuine reasons for doing so. If companies change commission structures then brokers will adapt, commission structures have been changed before and will be changed again. However, the removal of initial commission would have an impact on the market. It will make it much harder for new brokers to establish themselves and will effectively make it much harder for people thinking of starting a brokerage to set up. It will probably see several established brokers hit hard times too as with less new business being written in recessionary times, initial commission becomes all the more important.


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## Sumatra (17 Jun 2010)

I can't agree with you. The insurance companies you have your agencies with pay your commission full stop and you're biting the hand that feeds you which as I said here two years ago is very short sighted. The insurers can't make money on the particular type of 'savvy' business they receive so they are going to introduce anti churning measures to everyone which you'll see the start of quite shortly. Personally for the long term viability and integrity of the market I will welcome them with open arms but I realise others will fear them and I've really nothing more to add.


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## StevieC (18 Jun 2010)

Sumatra said:


> I can't agree with you. The insurance companies you have your agencies with pay your commission full stop and you're biting the hand that feeds you which as I said here two years ago is very short sighted. The insurers can't make money on the particular type of 'savvy' business they receive so they are going to introduce anti churning measures to everyone which you'll see the start of quite shortly. Personally for the long term viability and integrity of the market I will welcome them with open arms but I realise others will fear them and I've really nothing more to add.


 
Sumatra I'd prefer you didnt get personal on this topic. I am not one of the brokers that writes to enquiring people who are not my customers every year suggesting they change provider. I am not biting anyones hand. 

I recognise that some are possibly abusing the situtation but I think they are by far in the minority. People are changing policies for genuine reasons at the moment due to outside economic forces.

Not every case you consider "churning" is churning, just because someone changes their cover early in a policy does not necessarily constitute churning. If insurance companies really want to tackle persistancy on term products then they should allow people to change the term/sum assured on their existing policy instead of insisting they take out a second policy or replace their existing one.


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