Voice recordings: Friend or foe?

Before the advent of voice recordings, paper trails formed the basis of the contract between the insurer and the insured and protected both parties. FAnews spoke to a number of players in the insurance industry to establish whether the advent of voice recordings has skewed this balance in either party's favour.

Today the majority of telephone calls to financial services companies, (insurers in particular), are answered automatically with clients and brokers being advised that their conversation with the company is being recorded. Unfortunately the significance of this disclosure may only become apparent months or years down the line.

Insurers keep these voice recordings as backup to the policy document sent to the client. The policy document records the risk detail; but excludes a number of 'underwriting facts', which the client may have disclosed telephonically and which were previously disclosed on the proposal form. The result is that significant disclosures contained in the voice recording do not appear in the policy schedule, potentially leaving the insured exposed in the event of a future claim.

Voice recordings enable insurers to create an additional safety net in the form of conditions which are not substantively included in policy wordings. The average consumer is unlikely to recall details of the telephone call when reviewing the policy.

In practice

Take some time to observe an individual concluding a telephonic transaction. In today's fast paced work environment most consumers are anxious to dispatch with telephone calls to address more pressing matters. The pressure to complete calls results in vague and ill-considered answers as evidenced in a number of recent FAIS Ombud cases. Consumers who gloss over the content of these conversations do so at their own peril.

This sitution contrasts with the more focused attention gevin to completing a written policy application. In the days of paper trails, thr broker could refer the client to a copy of the proposal form as the only justification for non-submission or claim repudiation. Voice recordings might lift some of the administrative burden from the broker; but raise more serious concerns such as selective use in dispute resolution.

A Sunday newspaper recently published a complaint from a consumer claiming that a certain cover was not offered to him by the insurer during a voice recorded contract. After a lengthy wrangle, the insurer referred to their voice recording and sided with the client. The recorded conversation was not made available to the newspaper and one can only wonder whether this was because the insurer was unable to retrieve the conversation or for more sinister reasons.

Boundaries

Voice recording is relatively new and stakeholders in the insurance industry are still establishing boundaries for its use. Legal guidance is available in the Financial Advisory and Intermediary Services Act(Act 37 of 2002) and the Regulation of Communications and Provision of Communication-Related Information Act(70 of 2002).

Pieter Erasmus, Head of Marketing at Momentum Short-term Insurance notes that aside from the legislative requirements, conversations are "recorded with the knowledge and consent of clients for the purposes of having an accurate record of content of an important part of the transaction and agreement".

Record keeping

South African insurance companies have well-established internal telesales policies. Chaheed Jacobs, Hollard's Call Centre Sales Team Manager says that "all telephone conversations are recorded – not only during the actual sale, but anytime information is given to a potential or existing policyholder". Hollard keeps voice recordings for as long as a particular policy is in place, and for five years after the date of cancellation.

Brokers and intermediaries should note that insurers also monitor their communications. Erasmus advised: "we record all conversations with brokers and clients, including sales, client servicing and claims".

Chief Underwriter at RGA Reinsurance Company of South Africa, Margaret van Zwieten echoes this stance. "All of RGA's direct life insurance clients would record all telephone conversations relating to the telesales of life insurance policies or products. All recordings pertaining to life insurance policies sold over the phone will be kept for the length of the policy, at the very least.

"Should the policy lapse or terminate the voice recording should be retained for at least six months after the event. Should a policy pay out on a disability or dread disease claim then the recording should be kept in storage in case further claims are made. In the case of pay outs on life policies, it can often take a few years for the executor of an estate to wind up a person's affairs, so all recordings need to be kept for the duration of the legal proceedings."

Knowing your rights

Insurance clients seem unaware of their right to obtain copies of these voice recordings. Respondents from the short-term industry indicate that clients can approach insurers for access to their voice recordings at any time. "Whenever there is a difference of opinion, we encourage policyholders to listen to the recordings anytime they have even a small query about the information they were given," says Jacobs.

Erasmus is slightly more reserved, stating that "some clients simply request the recording copy as a record of the discussion; we however do confirm all the relevant information via the policy schedule, so we generally decline such requests". But, he acknowledges that "all conversations between us and the client or his representative, such as his broker, form part of the contract, so the client should obviously be able to access it".

Life insurance recordings remain less accessible. Van Zwieten notes that "the insured would be allowed to obtain access to the voice recording if there was an issue of non-disclosure that needed to be rectified or queried, or if there are disputes/discrepancies in terms of a claim or pay out".

In practice, obtaining copies of voice recordings is not as simple. It begs the question; Why not? Insurers expect full disclosure from clients, but it seems clients cannot expect full disclosure from the insurers in return. This is supposed to work both ways, but the client is once again the loosing party.

Using voice recordings

The consensus is that voice recordings play a huge role in staff training and the monitoring of service levels in the industry. Jacobs says the two most important functions are to "legally verify the information given to the client during the sales process" and to "give the unique opportunity to review service levels to existing and potential clients which is extremely important in improving delivery". Insurers could also use voice recordings to "verify whether policy conditions were properly explained to the broker or his client".

While none of the short-term companies we spoke to review telephone records at claim stage as a matter of course, life insurance companies take a slightly different approach. In addition to using the recordings for training purposes, van Zwieten says "telephone recordings of life policies are accessed by the executor of an estate with regard to life policy pay outs. A critical illness or disability income claim would also result in the accessing of these voice recordings".

Using recordings to settle disputes

Claim resolution is where the practice of voice recording really pays off. Companies across the industry make use of voice recordings in the dispute resolution phase, specifically to clarify details imparted to the client at point of sale.In a recent case, an insurance company was unable to supply the Ombudsman for Short-Term Insurance with a copy of a voice recording in support of its case and consequently agreed to settle the insured's claim.

Mind the gap

There is enough evidence to support that voice recordings create an additional repository for information which may impact on a policy holder at claims stage. Consumers must pay close attention to questions and responses when purchasing or amending policies telephonically. Consumers and brokers alike have to take steps to determine what discrepancies might exist between the recorded voice conversation and the policy schedule. How can a client verify his answers after an hour long telephonic questionnare if all the answers are not reflected in the policy quote or policy schedule?

Consumers and intermediaries have the right to access voice recordings. Proactive industry would send voice recorded files to the client along with the policy document. This step would greatly enhance the image of the indudtry.

Until voice recording disclosure becomes mandatory, consumers will simply have to "mind the gap!"