The Office of Fair Trading (OFT) is to make a market study into consumer contracts, in order to identify issues that cause most difficulty and confusion for consumers. In the financial services area, the initiative is likely to examine contracts for both life insurance and critical illness insurance, where contractual issues have been the subject of controversy in recent years.
In particular, the OFT will examine ‘small print’ issues, in order to identify which types of contractual arrangement most often lead to consumers losing out, as a result of not understanding the complexities of their agreement.
The area of online purchasing of contract-based products will be a particular focus within the study, according to the OFT.
Earlier this year, the Association of British Insurers (ABI) already highlighted the issue of insurance companies, eager to issue quick-quote responses to enquiries received online, who failed to ensure that customers understood the conditions of the contract being offered.
The issue highlighted the need for the services of independent financial advisers, who can explain the ‘small print’ issues in insurance policies, particularly as each insurer has their own terms, conditions and exclusions.
In critical illness insurance contracts, for example, consumers are often unaware that the common conditions of back pain and stress are usually not covered. Second, stroke and many other ailments are covered only when they leave permanent symptoms.
Third, heart attacks are covered only when they are of ‘specified severity’ as established by an electrocardiogram test (ECG). This means that a mild heart attack might not qualify for a payout on the critical illness policy.
Fourth, critical illness cover does not pay for injuries or conditions deemed to result from drug or alcohol abuse, criminal acts, or injuries that are self-inflicted.
