The health insurance industry is renowned in the UK for innovation in marketing and products. But the insurance industry generally has a bad reputation with the public.
The bad reputation is mostly undeserved, but the industry has a disease you will not see in any private medical insurance policy.
“Insurance foot and mouth" is where it says or does something to shoot itself firmly in the foot by saying something totally outrageous which just gives ammunition to those who think insurance companies and advisors are con artists and villains.
The latest outbreak of “insurance foot and mouth" is the introduction by a broker of lie detectors, and mutterings of others copying.
The broker concerned - not one on this site - does not even deserve a name check.
The broker is set to trial voice stress analysis software - a polite name for lie detectors - which monitors the intonation and pitch of a caller's voice and ascertains whether or not they are telling the truth.
It is to be used in tele-underwriting; phone interviews used to get information for a quote.
The broker argues that as some critical illness claims are turned down due to problems when the customer fails to disclose true information, it is important to know if customers are lying when they give information for a quote.
This is like arguing that because a shop has a problem with a few shoplifters, every customer going out of the store will be frisked and searched at the door by security goons.
Many motor insurers have been using lie detectors on claims for a few years. But the technology is not perfect, consumer groups do not like them, and some insurers refuse to instal them.
Whatever mumbo jumbo is presented in defence of the use of lie detectors at point of sale, it cannot escape the simple logic that any company which uses it, or allows its intermediaries to use it, is treating each and every customer as a liar, guilty unless proven innocent.
Thankfully, a few sensible insurer voices are against the idea. They point out that it is a step too far. The industry already has a bad enough reputation with consumers on the issue of trust.
Turning tele-underwriting from the assumption that the consumer is telling the truth, to one where the assumption that the consumer is telling lies, paints a very bad picture of the industry. To introduce lie detectors into the underwriting process goes against the basis of the insurance contract that is entered into in good faith.
It also seems a direct contradiction of the insurance regulator’s demands that all insurers and intermediaries "treat the customer fairly" at all times.
Insurers argue that only a very small minority of people intentionally lie on their application forms. The real problem is lack of care and understanding. Insurers have made great strides in recent years to make insurance proposal forms easy to use, but too many still use a mix of legal and insurance terminology which could be in Chinese for all the sense they make to consumers. This is why tele-underwriting is popular with consumers. Destroying consumer trust in tele-underwriting by using lie detectors, is a backward step.
Any company that uses lie detectors is not required to tell customers other than in vague terms of “in order to help prevent fraud your conversation will be recorded.”
Come on FSA, make companies who want to use lie detectors in underwriting be honest and upfront.
Insurers and brokers have a one-shot only opportunity to stop permanent damage to the health insurance market. That is to come out publicly against lie detectors as an underwriting tool, and do no business with companies that use them.
Lie detectors do not prove conclusively that people are lying. They simply detect changes in the voice that indicate that the caller may not be telling the truth. Tests involving lie detectors have no legal validity in the UK, and insurers should be wary of using technology developed for national and security police in the US and other countries with les than perfect human rights records.
Critical illness insurance: Hot Topic: June 2007
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