Rebroking Life Cover

How often should life cover be rewritten? We have an adviser who rewrites plans every couple of years once the clawback period has ended. I do not think he advises them to cancel the previous ie I cannot advise you to cancel what you have as but I can offer you this one which is cheaper, has lots of great add ons etc so up to you if you want to switch.. I was always under the impression that unless there was a considerable difference in price for life cover then not to rebroke OR to be extremely careful re CIC due to either conditions covered in a previous plan not being offered in a new plan or possible new medical conditions. Just wondering whether I am too cautious in this regard.

Comments

  • I think if you can get the same quality policy for a lower price, or a better policy for the same price, or a better policy for a lower price, or maybe even a much better policy for what the client perceives as an acceptable increase in cost (e.g better income protection or critical illness terms) then re-broke as much as you like. If none of these apply, then surely it is just churning. Yes, I would agree that you have to be very, very careful that the new policy is at least equivalent to the old policy and comparing detailed terms and conditions is not going to be a walk in the park.

    Saying the adviser can't advise them to cancel what they already have seems very odd?If it is just a replacement contract, it is vital to advise them not to cancel the old policy until the new policy is on risk, and then to cancel the old policy once the new is on risk.

    Whether you can make a decent profit doing this (comprehensively comparing policy terms, issuing suitability, getting the new policy on risk etc) I don't know.

  • benjaminfabibenjaminfabi Moderator

    Cynic mode engaged, if you took the maximum commission the first time, then strategically sacrificed the right amount to get the replacement premium to a lower amount, it might be possible to rebroke the same cover several times over. But I'm not sure it would be suitable and it certainly wouldn't be ethical.

    Benjamin Fabi FPFS
    Chartered Financial Planner
  • NathNath Member

    Agree with Ben, sounds like he is churning as he is doing it purely because the clawback period has ended and for no other reason. Have the clients circumstances changed? Was the original policy ever suitable if its being replaced every few years? To say he can't advise them to cancel the existing plan again seems a nonsense. Surely he should be comparing the plans and saying why the new one is better than the old one and this should be in the report.

    If the new plan is better or like for like but with a lower premium then I suppose fair enough as the client is not worse off, but it seems like the adviser is looking for an 'angle' to sell a new product for more commission, not because its in the clients best interests.

  • edited June 9

    You are being too cautious. It's absolutely fine to advise on new protection for equal or same benefits whatever the saving and as often as you'd like.

    Clearly, he's only doing it for the commission (because a decent adviser would charge separately to save on the premiums - it's not free money). But i don't think you have any thing to worry about if you can evidence an improved product.

    I'm also not sure why its not ok to advise the client to cancel old inferior plans. I wonder if he's actually NOT selling a better product than previous.

  • CaroCaro Member

    I have worked in places where we have done a review of the cost of life cover as part of the annual review. If we could find the same cover, with all the same benefits for a lower cost, we would have the conversation with the client and let them know.

    Invariably, it didn't happen often as they are obviously older every time we looked at it, but for WOL cases, where they were on maximum and there were cheaper balanced options providing the same level of cover, it's always worth a conversation. That said, we were fee based so commission didn't play a part in it, and it was usually part of the review service.

    Re cancelling the old cover, if he is introducing a new, improved policy, why wouldn't he recommend the cancellation of the old policy? If the client becomes overinsured and paying too much, that could be grounds for a complaint.

    I don't think there is any issue at how often you look at rebroking, it will of course depend on the client's circumstances and if there is demonstrable value to the client from doing it, I can't see an issue, as long as it's evidenced, documented and the client understands the costs.

    If there is no evidence of any improvement or client benefit, I think you would be hard pressed to justify it, even if the costs were the same. I guess it boils down the question of is it in the client's best interest? If not, don't do it!

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