Question
Many customers are concerned about making sure they have all parts of their life effectively covered and sometimes think it is safer to have two insurance policies to cover the same thing.
What should we be telling them to make sure they get the best protection?
Answer
Generally, there are two groups of people this applies to.
Firstly, there are the people who intentionally apply for dual cover, but these are usually in the minority. The second group are those who unknowingly have two sets of cover for the same item.
For example, some contents insurance policies will cover possessions when the customer is on holiday, but many people will still take out holiday insurance to cover the same possessions.
It isn’t wrong, but neither is it needed.
Whilst there is no clear reason why someone would go out of their way secure two insurance policies, there is nothing to stop them. In fact, there are few controls in place to prevent someone from doing this.
The systems that insurers work with don’t talk to each other, which means those in the first group may go for it, perhaps thinking that this will give them twice the protection, while those in the second category could end up spending more money unnecessarily.
Where challenges start to appear is at the point of claim.
The rules here can be complex and the basic principle is that, if two policies are in place when a claim is made, then each provider will pay their proportion of the loss under the ‘rateable proportion’ clause included in most policies.
Generally, if two insurers are involved in the claims process, what should be a simple claim could take significantly longer for a claimant. Plus, in the event of the two policies having different limits or like excesses, matters are made more complicated and could take even longer to settle.
Although it isn’t recommended to have two policies for exactly the same thing, there can be many benefits of having complementary policies.
Take income protection, for example. Some policies only cover short periods of up to a year, whereas other products are designed to cover the client longer term, but with a longer excess period meaning claim payments might only start after one year.
Having two policies that would provide continuous cover from day one may therefore well work out in the customer’s favour in the long term.
The key here is in understanding the policy and knowing where it can be personalised to your clients’ needs.
If we go back to the holiday insurance example, some providers now offer the option to remove personal possessions cover, which may also be provided by the customer’s home insurance policy.
This can reduce the overall cost for the customer and remove the dual cover issue, whilst ensuring that the customer is still covered for things like injury and illness medical costs during their holiday.
There is a huge opportunity for brokers to highlight the value of their advice and expertise by ensuring that customers are educated on the implications of dual cover.
This may mean that you are able to save them money in some areas whilst also winning additional business by highlighting the benefits of complementary policies.
Having this conversation not only helps to find the best products, but also maintains a good customer relationship.
