Life Insurance – What To Do If You Think You Were Mis-Sold It
Over the last few weeks, you may have seen several news items about life insurance complaints. Revolving around the supposed mis-selling of ‘whole-of-life’ policies, the complaints are focused on the fact that the amount the individual was initially insured for was less – often significantly so – than that which was paid out once claimed.
Take Yoga Kissoon’s case as an example, which was recently highlighted in an article by the BBC.
Mrs Kissoon took out a life insurance policy in 1990, six years after her husband took out a policy. They wanted policies where the premiums and sum assured – £30,000 each – remained the same and this is exactly what they were told they’d receive when they arranged the policy. However, the value of both policies decreased in recent years – first Mr Kissoon’s to under £25,000 in 2004 and then to £20,600 in 2009, followed by Mrs Kissoon’s to £24,000 in 2010. These decreases were further to letters to the couple explaining that unless they increased their monthly premiums, the sum assured would decrease.
Despite Mrs Kissoon complaining to the insurer on more than one occasion, nothing happened.
The unfortunate thing is that although the insurer wasn’t necessarily in the wrong – most policies explain that variations in the sum assured and monthly premiums can happen – Mrs Kissoon may have had a case for complaining if she had raised the issue with the Financial Ombudsman Service (FOS).
In essence, FOS look into consumer complaints against organisations when the consumer isn’t satisfied with the outcome they received. However, it’s important to understand that you must lodge your complaint with the FOS within six months of receiving your final response from the original organisation.
Looking at life insurance complaints, such as that for Mrs Kissoon, whilst you can’t complain about the small print of the policy, what you can complain about is if you were sold a policy without being made aware of certain stipulations. It’s a very similar situation to the PPI mis-selling – you can’t complain about PPI itself, but you can complain about the fact you were sold a financial product with PPI without knowing PPI was added onto the monthly premium.
Therefore, if you think you’ve been mis-sold your life insurance policy, you need to first make a complaint with the insurer themselves. Under new rules set by the Financial Services Authority (the body that governs all financial services organisations), the reply you receive to your complaint has to be the final one. If this reply isn’t the one you were hoping for, you are within your rights to essentially escalate the complaint to FOS, who will look into it further – just make sure you do so within six months of receiving the final reply from your initial complaint.
The most important point to note if you find yourself in this situation isn’t that you could potentially receive money back from the insurer, but it’s that you understand whether or not you are fully insured to the amount you expect to be. Whether you’ve received notification from your insurer of potential changes to your sum assured / monthly premiums or not, it’s strongly advised that you work with an independent and experienced life insurance advisor to go through your policy and understand the intricacies of it, including how much money you are currently insured for – only then will you be able to be confident that your life insurance policy is exactly as you expect it to be, whether you took it our two months ago or 20 years ago.