Should your bank hard-sell you insurance?

THE banking industry has been firmly in the spotlight of late, and many people – myself included – agree it deserves a large portion of the blame for the financial crisis.

The ‘culture of greed’, combined with an absence of morality and a clear decision by the banks to place the interests of their shareholders above those of their clients, have spelt disaster for families and businesses worldwide.

In recent years, the banks in Spain have been less active in their traditional roles – taking deposits and making loans to customers – and increasingly focussed on secondary activities, such as ‘selling’ insurance products to their client base.

Here is the big question… Does the client get value for money when they are obliged to buy their insurance from their bank?

A recent report published by INESE and Global Actuarial compares the premiums and coverage of yearly renewable-term life assurance offered by banks and insurers in 2014. The report concludes that the banking sector’s rates are significantly higher than those of the insurance companies.

The biggest differences – often in excess of 30% – were to be found in 30-year-old age group, where for a limit of €120.000 the average bank premium was €240.28, compared to €152.85 from dedicated insurers.

Our personal experience at Op de Beeck & Worth indicates that the same tends to be true when it comes to banks selling home insurance to their customers, with the added complication that often the client ends up with an policy that does not provide the cover they actually require.

Despite this, banks have become increasingly aggressive at ‘forcing’ insurance policies onto their clients.

This begs a further question. Can your bank ever oblige you to buy insurance with them? The answer is no, they cannot, but… they will still ‘try it on’ regardless.

If you find yourself on the receiving end of cold-selling tactics, the best thing to do is to ask for the bank to put in writing the fact that you are obliged to buy insurance from them. You will see how suddenly their tactics change. Suddenly, you will regain your freedom of choice to buy your insurance from the provider you prefer, opposed to being pushed around by your bank.

I advise you also ask your bank questions like this: “Who am I going to deal with in the event of a claim? Will the person I deal with speak English? Will I have a personal contact or simply be dispatched by a call centre?”

Insurance contracts are complex products that should never be imposed on clients. An insurance contract should result from a detailed analysis and understanding of the client’s requirements. Only then can the policy be expected to respond reliably when the insured event occurs. This requires knowledge, experience, and above all, an independent approach.

I personally think that if you are seeking independent insurance advice, you should contact an established, authorised and fully-regulated insurance broker who can recommend the package that best suits your requirements. After all, if you had a health problem you would not make an appointment with the butcher!

Your insurance broker should be one of your key advisers, along with your accountant, lawyer and doctor. Your broker is licensed, regulated and meets all ongoing educational requirements to ensure that the client receives expert unbiased advice.

Whether it’s finding the best coverage at the best price, or negotiating a claim on your behalf, your broker helps you to protect your family, your possessions and your business.