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UK – Recruitment agencies accused of mis-selling insurance

26 September 2013

Recruitment agencies in the UK have been accused of selling accident insurance to temporary workers that may duplicate coverage they receive from their agency, according to the BBC Radio 4’s Today programme.

Commenting on the programme, a temporary worker identified only as ‘Jane’ said: “If you’d broken your arm and needed six weeks off you would get full pay for the whole six weeks. So, obviously I wouldn’t be able to attend work but I’d still get full wages for being at home. You were opted in but you could opt out if you wanted. We were just told that £2.50 of your wages would be coming out every week. Very few opted out.”

The programme spoke with Sarah Veal, policy director at the Trade Union Congress (TUC), about whether or not it’s possible to have too much insurance. She commented: “I would say you can have too much insurance, especially if it’s duplicating the employers’ insurance, which they have to take out by law, which would cover you if you’re hurt or if you get ill at work. They’re insured against whatever damages you might get from them; so to get the employee to insure themselves as well is just completely, absolutely unnecessary. It’s a rip off.

When the BBC interviewer pointed out that the insurance was voluntary, Ms Veal responded “Well it’s only voluntary on paper. Most people wouldn’t realise that they’re being allowed to opt out or wouldn’t possibly understand what it is that they’re being asked to opt out of. There’s lots of complicated things on your payslip and I think a lot of people would just assume that it’s something you would just have to say goodbye to as part and parcel of what gets deducted from your wages.”   

The issue was brought to the attention of the Financial Conduct Authority by David Green, who is a partner at law firm Edwin Co. He commented on the programme: “Our concern is about the selling process. This is, in a way, one step up from PPI… We think that that process should be regulated. We believe these agencies fall within the statute as to requiring authorisation and it should be regulated. Is this product being sold by someone as a business? Our understanding is they are receiving remuneration for it, so I think it is being used as business and we’ve taken that up with the FCA.”

The Financial Conduct Authority (FCA) has told the BBC that they will be reviewing the situation. Simon Green, head of insurance at FCA, said to Radio 4: “Generally speaking only firms that are authorised by the FCA should be doing regulated business. Selling or arranging insurance is a regulated activity. One of the things we will be looking into will be the role that agencies have been playing in this and whether that actually constitutes regulated activity.”     

The Today programme did confirm that no illegality has been alleged. 

In response, Kevin Green, chief executive of the REC said: “[recruitment agencies] certainly are not selling insurance, they are giving people the opportunity to take insurance up. It is absolutely clear in terms of the way that the industry is regulated that they cannot sell insurance but they can offer it. They can put it in front of people but they have a choice to decide for themselves whether they will take it… In terms of our evidence, most of our members are saying that take-up is less than 10%.”

Kevin Green was adamant that none of the REC’s members were involved in mis-selling. “We’ve talked to the FCA - there is no complaint at the moment about any of our members doing this.” He also stressed that the insurance sold by staffing agencies provided cover for periods between temporary assignments when workers would not be covered by normal employer’s insurance.  

He added: “The way in which recruiters offer temporary workers insurance cover has been completely misrepresented by the TUC. We need to be clear that recruiters are not selling the policies to workers and are following guidance given by the FCA. Recruiters can make their workers aware of insurance products that are appropriate to temp workers and these workers make their own decision on whether or not to buy the products."

“Temporary workers often find it difficult to access benefits like insurance products due to the nature of their work and recruiters can make them aware of suitable schemes. These products can offer cover that many permanent workers take for granted and could offer the worker with much needed financial support if they are unable to work because of an accident or illness without having to prove the liability of their employer. It is bizarre that the TUC seems to have a problem with this when many trade unions also offer personal accident cover to their members in the same way that recruiters or other businesses would do.”


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