Customers with personal accident insurance need an explanation of the extent of their cover, but it is not quite so straightforward as there are terms that need to be defined. Robin Wood explains
One of the more important aspects of personal accident insurance is the definition of disability. Because the definitions vary in their exact wording we are going to look at generic definitions which may seem a little truncated when compared with what you are used to.There are three that we need to consider and do not imagine that this is a subject that you can ignore. Personal accident and sickness crops up all over the place either as a policy in its own right or as an extension to another.There are three instances of where personal accident and sickness affect an individual's ability to work:
Underwriters' interpretationThis all seems very fair, but what is the actual wording of the last policy you recommended to a client and could the strict interpretation be far harsher than this? Remember that many underwriters may seem like Jonesy the butcher in Dad's Army when you place the insurance, but when it comes to policy interpretation and paying claims it is often the image of Attila the Hun that comes to mind.Certainly, if we now look at the needs of our man in the street the suitability of the policy is not so clear. Indeed we have to spend a little more time working out whether in the event of disability he will actually be able to meet financial commitments.Some policies use a definition of disability. as being unable to undertake any occupation. It is a horrible option and one that should normally be avoided if possible. Consider that an occupation can be anything that earns income, so that one would, in the strictest interpretation, have to be totally incapable before any payment could be made.By now you should be checking the wording of all the personal accident policies you recommend even if it is an extension to another contract, such as motor or household. The chances of having your customer meet his demands and needs are now remote and in the event of a claim you, the broker, are likely to be in big trouble.Ask yourself this question: " How many people have you come across who are so disabled that they cannot carry on any occupation?"The fact is that each of these definitions attracts a wildly different rate of premium so the more restrictive the definition the cheaper the premium until with the last option there is a no claims bonus. The bonus is for the insurer in that the insured is unlikely to be able to claim.Such a policy is only likely to be suitable for someone who wants the cheapest premium and understands the limitations, perhaps is unable to obtain terms under the other options but still wants some cover. Or the policy could be used in disaster planning when total incapacity or, in particular, loss of mental function can have a short term financial effect, for example a key man in an organisation.
Policy suitabilityIf the last definition meets the needs of the customer then the suitability of the first two is called into question, as they are both likely to produce a more expensive premium.Ultimately, if the policy you recommend as an intermediary is not reasonably suitable, or there are obviously better alternatives available, you may be non-compliant. Now that is a learning point.Remember the golden rules:
Using this CPD pageFor the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated. If you are a member of a professional body with a CPD requirement then there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body. Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated. For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant. Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website. We will be preparing a binder for you to keep these in alongside the results of the exercises.