You arrived at this page by selecting:Insurance Companies — are they being fair? (YEP 03/04/08)
I read recently about a Health care cash plan which had left many of its members shocked and angry. Like many of these schemes they seem to attract the more vulnerable or less well off and work by members paying in weekly in the event that when something happens to them (which is covered within the policy) they get some money back. Those people who had paid into the scheme, some for over 60 years, had done so because it offered certain benefits such as payments towards rehabilitation at home, convalescence and funeral costs. The company had decided to withdraw these two particular benefits which left many of its members wondering how they would find the money for those expenses which they were told they were covered for originally.
The company had a clause in the small print enabling them to change or withdraw services by giving 28 days written notice — little consolation for those members who only continued with the policy for those benefits. Those members have effectively thrown their money down the drain. Is that fair?
Reasons for the withdrawal were that the insurer decided to no longer cover funeral costs and the Financial Services Authority defined funeral benefit as life assurance whereas the plan provider considered itself as a general insurer. They believed it was now inappropriate - again little consolation to its members. A classic case of consumer protection turned against the consumers.
Lots of Insurance companies do offer life assurance, investments and general insurance. Their products can be complicated often coming with a booklet or two of small print. It is easy to get confused as to what you are covered for and you usually rely on the person that is selling it to you to explain it clearly. Problems can occur later down the line when the person who sold the product has changed jobs and the insurance company point to the the small print as to why you are not insured.
I knew of another example where a lady thought she had bought insurance to cover her against care home fees when in actual fact she had bought an investment product which was hopefully going to grow sufficiently in order to cover care home fees. She only realised when she was asked to add a further £8000 years later to keep her on target.
But if we are not small print experts then are we likely to get caught out somewhere down the line? It seems we probably are or at least we will have a fight on our hands with the large insurers over small print and whether it is fair or not.
However, there is some new legislation called the 'Unfair commercial practices regulations' due out May 26th. This new legislation is targeted at the fairness of how products are sold, advertised and marketed and companies might just have to make things fairer and clearer from then on.
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