Many problems can arise from confusing, incorrect or irrelevant literature from an insurer. Waltham Pitglow recommends a exercise to safeguard brokers and their clients

First, here's a reminder that the CPD competition entries should be in by midnight on the 17 October.

If you still wish to enter but do not have details go to the Insurance Times website and look up the CPD page for 26 September.

Masses of queries and a few entries are already in. Perhaps I could add that there any many aspects to this case and there is no right or wrong answer. So do not try to impress by following the book.

Here is just one point that has arisen. The underwriter said that the claims/losses under the business policy were relevant on the basis that it was a partnership and, as such, the ownership of the vessel fitted the question, "of which you were legal owner".

But if the business were a limited company the question would not be relevant and the losses not material.

Think about it. Is it market practice that someone answering a question about losses on a personal proposal is expected to give losses arising under a business partnership?

The person who wins the champagne is going to be the one who identifies the issues, not the one that gives the academic answer.

Informed decision
Which leads nicely on to this week's CPD and those wonderful insurance companies who might be leading broker's into trouble.

Let us deal with learning point one: It is a broker's duty to make reasonably sure that customers can make an informed decision about the insurance they are buying.

It is a broker's duty to reasonably ensure that customers understand the rights, responsibilities, duties and conditions that they contract to with the insurer.

Well, if you read read the GISC codes that is old hat. But what happens if the insurer's promotional literature is hopeless in assisting in either regard? (Cries of disbelief from the ABI that any of its members could produce anything other than faultless material).

The structured exercise this week is for you, either as a broker or working for an insurer, to analyse at least one set of promotional literature and a proposal for a given insurer and a given product. The first step is to obtain the policy document as a check against the contractual cover, this will include advertisements and websites.

The objective is to identify any aspect of the documents that:

  • Might cause confusion in the mind of a customer

  • Are ambiguous

  • Contain non-understandable jargon to a layman

  • Exaggerate cover or benefits

  • Do not give sufficiently clear warnings about onerous conditions, responsibilities and policy terms

  • Have print that is too small to read

  • Proposals that do not ask key questions such as, "have you ever been bankrupt or convicted of a criminal offence", under a business proposal

  • Are generally non-compliant.

    You can add to the list if you wish. Ultimately, the writers and designers of these documents are not the claims handlers who might turn down your customer's claim.

    Reducing risk
    These days the person who writes the promotional literature and the claims manager are worlds apart. Equally, proposals and policies are written by committee, often using terminology from the dark ages, so do not expect any help there.

    This process of reading and identifying the suspect elements should take you an hour or so. If you have a list on your sheet of paper at the end then, as a broker or insurer, you may be at risk.

    The next step is to consider how you reduce this risk? First, you might write to the insurer. (Go on be brave).

    If enough brokers do it they will have to change their ways. More importantly, you should make sure that the customer is enlightened.

    A good example is the proposal that mentions the duty of disclosure but does not explain what it means or the effect of a breach.

    The final step is to amend your procedures manual to make sure that you go through this exercise every time you start recommending a new contract or using a new insurer.

    If you really want to make it a worthwhile learning exercise then get one or more colleagues to go through the exercise and then meet to compare notes. You will be surprised how many different issues are raised and you can learn from each other's opinions.

    Don't forget to record the exercise in you individual training file.

    Learning point two relates to non-delivery of policies and endorsements by an insurer.

    As a broker you are expected to know and understand the terms of the contract that you recommend to a customer.

    Under the exercise above you should have had a specimen policy document to compare with the literature and proposal.

    What happens when you put a customer on risk, or the risk changes by endorsement and the insurer takes months to send you the wording?

    Specimen policy
    This is something that you must consider with your legal advisers, but you might ensure that you have a specimen policy in your office for every policy you recommend.

    When you write, or communicate in any other way, instructions to hold covered, tell the insurer that your customer is prepared to be bound only by the terms of the specimen policy that is in your possession, unless an alternative is received. This applies to warranties and other standard conditions.

    In particular, if an insurer applies say an alarm warranty, make sure you have the actual wording and have conveyed it to the insured. If not, tell the insurer that your client cannot be bound by it until it has sent you the specific wording.

    Too often underwriters apply warranties on the assumption that the broker knows what they mean. If you say nothing you may be deemed to have understood and that can be expensive.

    Learning point three. Never be ashamed to tell an underwriter that you do not understand something.

    Finally, industry sources say that 8% of all claims occur in the first month of an annual policy and that a growing number of claims are being rejected because the postman has not delivered renewal instructions or "go on cover" instructions.

    To cover yourself, make sure that you have proof that an underwriter has received these instructions.

  • Waltham Pitglow is an insurance investigator specialising in compliance.

  • This page is edited by RW Associates, specialists in training, compliance and competence. Email to
    ruy.lopez@rwassociates.softnet.co.uk.

    Using this CPD page
    For 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.

    To download a PDF of this article as it appears in the magazine click here .

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