In March via the Commission’s website, the Commerce Commission provided guidance relevant to many financial service providers and advisers in a release titled, “Lessons for finance sector from Commerce Commission investigation into Credit SaILS.”
Insurers and advisers might have ignored the report because it is about an investment product. A quick glance shows you that the report quickly becomes technical and this further serves to obscure the fundamental issues of consumer protection. In fact, the report is a good reminder that the client is our main concern.
The Commission released a number of comments. Some of these were specific to investment products and are not included here, but many are directly relevant to insurance products, and at a conceptual level the Commerce Commission has little interest in the distinction, their function being consumer protection. Here are the most important items.
“All information conveyed must be accurate”. It’s embarrassing that this even needs to be stated – yet there it is.
“All key terms must be disclosed up-front”. Anything significant about the offer – its upside, downside, costs, term etc. – needs to be highlighted early on. Interesting – how many times do you see key terms buried at the back of dozens of pages of policy documentation?
“It is possible to mislead by silence”. What you leave out or obscure can mislead, as well as what you choose to say. Ensure that all relevant information is provided. It is not enough to simply make sure what is presented is true.
“Give prominence to representations that investors will care about. The risks were found on page 42 of the offer; a position so unbalanced and lacking in prominence as to be misleading.” At which point I wonder, if it requires reference to four separate parts of a policy document – a clause, several definitions, exclusions, and the claims process sections, for example to work out if a claim won’t be paid, that might not give sufficient prominence to an issue.
“Use plain English, not technical jargon”. Being familiar with our own business we can fail to see what is confusing. I’ve shown different policy documents to consumers and the reaction is almost always bad. Most find them too hard to understand. Most insurers in New Zealand have some parts of their policy documents that would fail this test.
“Financial advisors are a critical source of information…”. What you say makes a difference – and the case of Credit SaILS the Commission pointed out the importance of the issuer of the product ensuring adequate training otherwise you may unintentionally mislead.
Although you can’t make insurers change single-handedly you have a very important part to play: your advice process can make up for the deficiencies in their policies. You can also tell them that they need to improve documents.
