Avoid potential complaints by carefully reviewing applications with clients
The bulk of insurance companies and financial advisors in Canada evaluate client complaints to the satisfaction of their customers. But the head of the industry’s consumer complaint resolution service says advisors must nevertheless keep close watch to ensure they have properly filled out applications and have asked clients to read over the forms before signing to avoid future potential complaints.
“By and large consumers’ expectations are being met by insurers and advisors,” said Holly Nicholson, executive director, ombudsman & general counsel at the OmbudService for Life & Health Insurance (OLHI). “We get complaints because these are the cases where they aren’t. And we can take the learnings of where those complaints come from to then proactively address them through the sales process to try to make sure these issues don’t come up in the future.”
Currently there is a formal, two-step process in the life and health insurance industry if clients have a complaint. They first go to the insurer, which then sends its decision to clients, noting that if they are not satisfied with its decision they can go to OLHI, free of charge.
The Canadian Life and Health Insurance Association (CLHIA) does not keep any public statistics on complaints. But Nicholson says OLHI receives about 2,500 complaints every year. Using a triage system, OLHI whittles down the number of complaints it looks at annually to about 250. Of those, 10%-20% have merit.
If OLHI believes there is merit to a complaint, it acts as a mediator between the insurance company and the client since it does not have any binding authority. OLHI often ends up explaining the insurer’s side to clients, outlining how a product that they purchased works or perhaps potential cut-off dates to their insurance coverage. So far, all of OLHI’s recommendations have been accepted by insurers.
About 82% of the complaints OLHI receives deal with disability, then life and finally, extended health. Another 9% deal with advisor behaviour, mainly with issues related to life insurance and retirement. Specifically, said Nicholson, most complaints that involve advisors come from clients who believed they were not getting the kind of product they wanted, or that the product they bought didn’t have a feature they thought it had.
OLHI has published a series of close to 30 case studies on its website “so everyone can learn from the complaint experience,” says Nicholson.
In one example, a client said that when he reviewed a copy of the application for critical insurance coverage that was sent to him, he noticed that the advisor had checked off a box that the client would not have done. He tried to get in touch with the advisor, but did not hear back. He did receive a letter from the insurer, rescinding his insurance coverage because some medical coverage had not been disclosed. The insurance company said it was up to the applicant to review all questions and answers before signing.
Nicholson says clients should be shown the completed application and then make any corrections before signing it. She does note, however, that not all application errors are the fault of the advisor.
In another case example, a mother bought whole life insurance policies for each of her two children with the intention that they both had the same value and dividend options. However, when the policy went to the insurance company, only one application was filled in with the dividend option. While the second application contained the sales illustration of the dividend option it was not written down on the form. The insurer then applied the default dividend option, as was allowed under the contract. When a complaint was made, OLHI resolved the issue between the client and the insurer.
Nicholson said these types of examples prove that advisors must pay special attention during the sales process to make sure all the material is recorded properly on all the necessary application forms, otherwise complaints can arise when consumer expectations aren’t met.
“[In these cases] there’s a disconnect in what consumers thought they were getting and what they actually got,” said Nicholson.
She said complaints should be considered a learning tool because they show common areas where faults take place. “And if you are armed with that information in advance, advisors can proactively address these issues when they are servicing their clients.”