Direct marketing insurance has evolved the manner in which insurance contracts are concluded. Long gone are the days of lengthy and laborious hand-completed proposal forms. Instead, call centre agents sell insurance contracts en masse directly to the public over the telephone. With a healthy balance sheet front of mind, the central focus on training call centre staff is usually to enable them to sell insurance products and staff are often incentivised accordingly. However, an often over-looked feature of the function of call centre staff is that in making a successful sale, they are creating a legal insurance contract, the terms of which are binding on the parties. Call centre staff pose a series of questions to the proposer and the responses are captured on a voice recording and stored as proof of a completed ‘proposal form’.
In many instances, and partly because of the often informal way in which sales-call communications take place, the consumer is unaware that the answers that he or she is providing constitute binding contractual undertakings. This is so even though in most sales calls the consultant will rattle off a series of formal sounding disclaimers to inform the consumer of the nature of the call. The monotonous tone and speed in which these statements are usually delivered do little to enhance the delivery of the message that they are intended to convey.
Once the risks are accepted by the insurer, the telephonic recording of the ‘proposal form’ constitutes the legally binding insurance contract. Inherent in the entire sales process is a disconnect between training of call centre agents and the legal implications attached to a telephonically-concluded insurance contract.
This ‘disconnect’ often becomes apparent when a claim is made by an insured and the insurer retrieves the sales call in order to assess the veracity of statements made by the insured at the sales stage against the assessment made during the claim. It often happens that an ex post facto review of the sales call reveals material deficiencies in the manner in which the sales consultant communicated the important contractual elements of the contract. In some instances, these deficiencies will even result in an insurer being forced to pay a claim that it might otherwise have been able to avoid.
The training of call centre staff should therefore shift away from generic sales and incentive-motivated training with a greater focus on the legal implications of concluding contracts telephonically. This is vital in ensuring that insurance contracts entered into telephonically are aligned with Policyholder Protection Rules (‘PPRs’) and the Treating Customers Fairly Principles (‘TCF Principles’).
Best practices for call centre agents to adopt in training
From a legal training perspective, call centre agents should adopt the following best practices:
- understand the full legal implications of concluding an insurance contract telephonically, which include that:
- the insurer may be held liable for cover which it does not intend to be held liable for; and
- that the insured may be refused cover due to a material non-disclosure made telephonically (Rule 20 (Misrepresentation) of the PPRs);
- provide customers with clear and accurate information before, during and after the point of sale in accordance with the TCF Principles and Rule 11 (Disclosure) of the PPRs;
- inform the insured that where a policy has a term longer than 31 days and no benefit has yet been paid/claimed or an event insured against under the policy has not yet occurred, he or she may cancel the policy entered into with the insurer by way of a cancellation notice to the insurer (Rule 4 (Cooling off rights) of the PPRs);
- understand that the act of contacting a customer to conclude a contract without having them properly consent to all material aspects of the contract constitutes a violation of section 41 of the Consumer Protection Act 68 of 2008, which prohibits unfair tactics in the negotiation conclusion, execution or enforcement of an agreement;
- inform the customer that they are entitled to request the telephonic recording (Rule 11 (Disclosure) of the PPRs) and that insurers are obliged to retain these records (Rule 16 (Record keeping) of the PPRs); and
- act fairly, diligently, with due skill, care and in the interests of the customer at all times (Rule 1 (Requirements for the fair treatment of policyholders) of the PRRs).
 See for example, Hermione Nell & Others v Constantia Insurance Company Limited & Others. In this case,between 2010 and 2018, and following a print and telephonic marketing campaign, more than 5000 consumers took out a species of short-term insurance cover with Constantia Insurance Company Ltd. This indicates the popularity and wide use of telephonic marketing as a means to ‘selling’ insurance products. Fasken Insurance published an article on this case available at Cancelled, not! | Knowledge | Fasken.