The Office of Fair Trading (OFT) has launched a consultation document on how to protect consumers in the online age. The implications of the discussion emphasise the need for independent, unbiased financial advice to guide consumers on funds investments or purchases of life and critical illness insurance products online.
Earlier this year the Association of British Insurers (ABI) pointed out that consumers buying life and critical illness insurance and other insurances online, rather than with financial advice from an independent financial adviser, run risks in several key areas.
Principally, insurance companies rushing to provide a ‘quick quote’ online may do so without fully evaluating the circumstances and situation of the customer. Some providers make certain assumptions about the customer, which can be inaccurate or incorrect. The customer, for their part, may have little understanding of the life cover or critical illness insurance policy they are buying.
One specific concern of the OFT is ‘targeted pricing’. Customers can feel seduced by attractive special offers on some life and critical illness insurance policies offered online. However, it may not be clear which of these are included as standard, and which are optional ’add-ons’ that come at extra cost.
Financial advice can also help a customer navigate the sometimes complex maze of terms, conditions and exclusions of life policies, but in particular of critical illness insurance. A simple mistake at the application stage can reduce or void critical illness insurance claims, later on.
Other factors the OFT will consider to protect consumers may include clarifying the levels of protection available for consumer-to-consumer sales, checking on non-compliant websites, and strengthening payment systems for online purchases.
