Surviving Economic Abuse (SEA) is calling for the life insurance industry to changes to policies and processes to combat economic abuse and empower victim-survivors.
This includes the ability to cancel or replace joint life policies, restrict the ability to take out joint named policies without consent and develop visible domestic abuse policies.
In a briefing on the issue SEA said insurers should: “Establish mechanisms for joint policies to be cancelled or replaced with individual policies to reduce the risk of harm to the victim-survivor of economic abuse.“
Other recommendations include that providers: “Proactively seek to close opportunities for life insurance policies to be taken out in joint names without one party’s expressed consent or knowledge.”
The briefing, titled Life insurance and economic abuse, identifies the impact of life insurance policies on victim-survivors of economic abuse.
Authored by Professor James Davey, University of Bristol, and Johnny Timpson, it explains the legal and regulatory challenges which mean life insurance can be used as a tool for abuse.
Timpson has previously spoken out about the dangers of abuse in life cover, and is working on options for legal or regulatory remedies enabling insurers to split life cover policies where there is evidence of economic abuse.
In July he also urged insurers to give training for all frontline staff to help detect and prevent economic abuse.
This briefing aims to create an awareness and understanding of how life insurance policies are used as a form economic abuse and coercive and controlling behaviour, and the devastating impact this has on victim-survivors’ economic and physical safety, the charity said.
Life insurance policies being taken out without the policy holder’s consent or knowledge can lead to ongoing coercive and controlling behaviour and economic abuse.
It makes recommendations for how the insurance industry can prevent the use of their products as a form of economic abuse through changes to policies and practice.
Prevent foreseeable harm
The briefing aims to make best practice recommendations for firms to follow, in line with their Consumer Duty to prevent foreseeable harm to victim-survivors of economic abuse as vulnerable customers.
“We recommend that insurance firms proactively amend their policies, procedures and practices, as well as provide necessary training for staff, to prevent foreseeable harm to vulnerable customers,” the SEA said.
It said that insurers should also “develop domestic abuse policies that are prominently displayed on their websites, so victim-survivors know how their insurer can support them in response to economic abuse.”
One of the key issues identified is that life insurance policies being taken out without the policy holder’s consent or knowledge is an opportunity for ongoing coercive and controlling behaviour and economic abuse.
SEA noted that: “Abusers’ ability to financially gain from a victim-survivor’s life insurance cover, even after separation, has been known to create an incentive to kill, which places victims of domestic abuse at a constant risk of homicide.”
Timpson said: “The lived experience of victim-survivors of domestic abuse informs us that general and life insurance covers can, and are, used for the purposes of economic abuse and exercising coercive control.
“As insurance professionals it is essential that we are ever vigilant and aware of financial abuse plus and importantly, that we embrace the training, Consumer Duty Guidance and recommendations being made available to us by Surviving Economic Abuse.
“Simple steps such as writing single life insurance policies in trust rather than joint life policies reduces the risk of financial abuse and improves customer outcomes.”
Sale process in ‘urgent need of modernisation’
Davey said: “The formal legal position on the sale of life insurance over the lives of spouses is in urgent need of modernisation.
“That might be by statutory change, but is more likely to be via regulators, such as the FCA, and the insurance markets coming together to resolve an enduring source of economic abuse.”
Lauren Garrett, financial services manager at SEA said: “Insurance products, particularly life insurance, are often overlooked when considering responses to economic abuse.
“However, as our paper identifies, life insurance is intrinsically linked to physical safety, and has been used as a form of coercive and controlling behaviour, including threats to kill victim-survivors – and in the worst cases, financially benefit from killing them.
“It’s vital that insurance professionals are aware of the harm that these products can cause, and their role in both identifying and preventing it from happening through the products and services that they offer.
“The Consumer Duty places a responsibility on firms to do this, however clear guidance from industry leaders is needed so that insurance professionals know how to identify when this form of abuse is happening and close it down.”