Earlier this year, we welcomed the publication by the government of its long awaited UK Fraud Strategy. Among the actions included in the Strategy is a proposal to extend the ban on cold calling for pensions and personal injury to all financial products and services. This proposal aims to stop fraudsters from deceiving people into buying fake investments or other high-risk illegitimate financial products.
The Cold Calling Threat
As fraud continues to be the most prominent threat facing the UK – being the single largest crime type in England and Wales, we fully support the intention of a ban on cold calling to reduce fraud and protect innocent customers. Cold calling is used by fraudsters to target vulnerable people and perpetuate the fraudulent sale of financial products, such as insurance. Our own detected fraud statistics highlight the average claims insurance fraud is now valued at £15,000, a 20% increase on 2021. The economic, physical and emotional harm inflicted on victims of these scams can be grave. Aside from driving up insurance premiums for everyone, it also has consequences for society at large by funding other serious organised crimes. Action to tackle fraudsters and protect innocent members of the public is therefore welcome.
Clarity on Scope of Ban is Welcome
Over the summer, the government consulted on the proposed ban and provided more clarity on its scope and the products and services captured. Their confirmation that the ban will not affect non-marketing activity or consensual marketing (i.e. interactions where consumer has given consent to be contacted for marketing purposes) is welcome. It will mean insurers ability to contact consumers to provide an update on an insurance claim, seek feedback or inform them that their policy is up for renewal will not be affected. This will enable insurers to continue to provide quality products and services to consumers as well as contribute to protecting and building a thriving society.
Unintended Consequences Must be Avoided
However, it’s important the outcomes of the ban reflect the policy intent and avoid unintended consequences which impact current legitimate and legal methods of communication with consumers which are to their benefit. There are some activities undertaken by insurers which promote consumer benefit which should be permitted, most notably, the use of ‘prospect marketing calls’, which are always undertaken in compliance with applicable data protection legislation and FCA regulation. It would be counterintuitive to existing and future legislation to restrict such calls and would lead to consumer detriment. A number of insurance products and services would be adversely affected if the ban is introduced in its current state, in particular provision of extended warranty and protection insurance, provision of assistance to third parties following motor collisions, group/scheme private medical insurance and insurers’ ability to contact customers following transfer of business between insurers. The government should further consider the scope of the ban to ensure it does not deprive consumers of the benefits these products and services bring.
Clear Exceptions are Needed
We strongly support an exception to the ban for situations where the caller is an FCA or PRA authorised business and there is an existing relationship between caller and recipient. We recommend the government considers extending this to include situations where the caller is partnered with an organisation that has an existing customer relationship, and where appointed representatives are selling financial products/services on behalf of an authorised business.
Consumer Awareness is Critical to its Success
To ensure success of the ban, it’s important that consumers are made aware of any ban on the use of cold calls. We believe that a large-scale public awareness campaign is essential, and would be compatible with the core strand of the UK Fraud Strategy to ‘empower consumers’. A campaign would make consumers aware that legitimate firms would not be calling them without their knowledge and that they should be on their guard if they do receive such calls. In short, it would help to equip consumers with the tools they need to better protect themselves against the risk of being scammed. We stand ready to offer assistance to government in support of any public awareness campaign.
Other Action to Prevent Fraud Must Not be Ignored
Finally, it’s important to keep in mind that a ban on cold calling will not be a silver bullet that will end this practice. Whilst genuine and responsible firms would abide by any such restriction, fraudsters will continue to have a motive to target consumers. They will likely continue to commit fraud, adapting their practices to achieve the same result by different means such as advertising on social media or using fake websites. It’s therefore imperative that the government continues to take other measures to prevent fraud and works in partnership with industry to tackle fraud, in particular working with the ABI to develop and publish the Insurance Sector Fraud Charter.