Telephone calls and internet sales

Recording telephone calls

The FOS has made it plain in Ombudsman News 18 that where vital information is gathered during a telephone conversation it is wise for the firm to take one of two steps:

  • to make and retain recordings of the conversation; or
  • to confirm the conversation by sending the policyholder a clear written statement of its contents.

The perils of not doing so are clear:

Where we cannot determine with any confidence what took place, we may decide to give the customer the benefit of any doubt and/or to conclude that there has been a genuine misunderstanding. In such instances we will try to place the parties in the position we believe they would have been in had the misunderstanding not occurred. In cases of alleged non-disclosure, for example, where we think that a request for information (or the response to it) was uncertain, we may review the claim as though the customer had given the correct information.

The FOS's preference is for calls to be recorded:

We are pleased to note that a number of firms do now appear, as a matter of course, to make and retain good quality recordings of critical calls. We regard this as good industry practice and we expect to be able to resolve disputes about what was or was not said by referring to these recordings. If recordings are not available, we will look to the firm to set out why – on the balance of probabilities – we should accept its version of events rather than the customer's.

Internet sales

In recent years an increasing volume of insurance has been sold via the internet, by both insurers and intermediaries. The FOS has indicated in Ombudsman News 1 that such firms need to consider five general issues:

  • The FOS is concerned about those sites which focus largely on price, and may give a customer the impression that competing products are otherwise similar in what they offer.
  • A firm offering advice through an internet site must draw attention to the main features of a policy, and be in a position to advise on its suitability.
  • Each policy wording should be available online so that customers can read it before making a decision.
  • Some customers may revisit sites and give revised information to obtain a cheaper quotation. The FOS believes that firms should be able to track such activity, and warn those concerned of the consequences of non-disclosure.
  • A firm may need to have access to a permanent archive of the site content and design as it was at the relevant time, the information given by the policyholder and the policy wording then in force. If such a permanent record is not available, the FOS notes that it will “rely heavily on the customer's recollection of the application process”.

In reaching any decision the FOS will have regard to the following factors:

  • the overall content and design of the site at the time of initial application;
  • the questions asked of the customer (and options for any standard answers);
  • the steps the customer had to take to complete the transaction, including the highlighting of major policy features;
  • any revisions by the policyholder to the information provided;
  • any warnings given to the customer.

Further useful information for firms conducting internet business can be found in an interview given by Peter Hinchliffe, the lead ombudsman for general insurance, in Ombudsman News 53. Hinchliffe makes three key points :

  • The ease and speed of internet transactions creates a greater potential for misunderstanding or errors on the part of applicants. There needs to be adequate safeguards, for example, to ensure that applicants understand the importance of disclosing information and are not rushed into giving approximate or inaccurate answers.
  • Whilst firms are not obliged to ask applicants to check and sign a printed copy of the online application, it is good practice. In any event, it is important that there is a permanent record of the transaction, and this must not be open to subsequent alteration.
  • If no record is retained by the firm, this may make it impossible for it to rebut allegations by a customer which are otherwise convincing.

Anticipating new sales methods, Hinchliffe also queries whether firms which decide to conduct business by text message will be able to satisfy the requirements of ICOB (Now ICOBS).