Consumer confidence could be damaged by guaranteed protection

Tue, 04 Mar 2008

A product claiming to pay claims in full, even if consumers have not fully disclosed could harm consumer confidence in the protection industry it has been claimed.

AXA have teamed up with IFA firm LifeSearch to launch a pilot life insurance product which guarantees a full payment if the claim is made after a two year period. They are hoping that the product will rebuild trust in the industry and offer consumers peace of mind. However, some advisers say that it could have exactly the opposite effect. "By marketing something as guaranteed, it could imply that everything else is a lottery. Therefore the existing trust in the industry could be undermined," said Peter Chadborn, principal at IFA firm CBK Colchester.

One concern is that if there is a guaranteed pay out, it could lead to consumers lying when they apply for the policy. Norwich Union considered introducing a guaranteed product last year, but felt the Association of British Insurers’(ABI) non-disclosure guidance was a more effective way of resolving the declined claims issue. Darren Dicks, head of protection marketing at the insurer said, "Two years is not a long time and it could lead to people thinking they don’t have to disclose fully."

However, AXA feels it can eliminate the likelihood of non-disclosure by tele-underwriting all the applications it receives and making consumers undergo a medical .
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