Term Insurance Decision Reference 2022-0253

Case OutcomeUpheld
Date29 July 2022
Subject MatterTerm Insurance
Finantial SectorInsurance
Conducts Complained OfFees & charges applied ,Premium rate increases , Results of policy review/failure to notify of policy reviews
Decision Ref:
Product / Service:
Term Insurance
Conduct(s) complained of:
Fees & charges applied
Results of policy review/failure to notify of policy
Premium rate increases
The complaint concerns a whole life policy, where the Complainant asserts the Provider
amended the way in which the indexation is calculated.
The Complainant’s Case
The Complainant asserts that when his whole life policy was set up with the Provider in 1996,
he was led to believe that the “increase in the premium was at the same rate as the increase
in the sum assured, for the automatic increase facility.”
The complaint further asserts that the terms and conditions of the policy state that the
automatic increase facility is increased at 7.5% or [the UK's Weekly Average Earnings Index],
whichever is the greater and throughout the entire history of the plan, still at 7.5%.
The Complainant advises that in the Provider's scheduled review letter of 10 June 2016, it
stated that his “next review is not until 1 June 2021.” The Complainant further advises that
he fully understands the review process, as set out in the Provider’s Regular Premium
Review” brochure, however, he contends that this is contradictory to the Provider’s letter
dated 11 April 2017, which stated that it “improved” the method used to calculate
premiums, for the sum assured increase.
- 2 -
The Complainant advises that the Provider informed him that his original contract was not
amended, however, it had changed the way in which the indexation is calculated. The
Complainant asserts that the Provider has denied this is an amendment, as it improves the
plan for the Provider but not client. The Complainant asserts that he was “misled by the
literature” and never expected the premium to rise above the rate of sum assured, on
annual automatic increase. The Complainant also contends that the Provider did not notify
him about the changes to the method used to calculate premiums and the dates on which
it carried out policy reviews.
The Complainant advises that this is opposed to the review increases, which he did expect.
The Complainant wants the Provider to refund his premiums and to stop the unscheduled
reviews. The Complainant also states that if the Provider intends “to change the terms and
conditions of the contract I applied for and signed, it can be cancelled”.
The Provider’s Case
The Provider submits that the insurance plan was distributed through independent financial
advisors and in this case the Complainant was the initial adviser on the plan. The plan is a
regular premium unit linked life insurance and critical illness contract. The Provider states
the plan was issued in the single name of the Complainant on a single life basis or if earlier,
upon admittance of a critical illness claim.
The plan commenced on 14 May 1996 with the monthly premium of £88.66 (eighty-eight
pounds, sixty six pence). This sustained an initial “Accelerated Critical Illness” sum of £80,000
(eighty thousand pounds).
The Provider states that the policy was set up on a maximum cover basis, meaning the cover
provided the highest amount of cover for the lowest possible premium. On a monthly basis
the bulk of the monthly premium is used to meet the charges to be taken that month. As a
result, there is a much lower proportion of the monthly premium to be allocated to the
underlying fund, than would be the case with the standard cover basis plan. As this plan was
taken out on the maximum cover basis, the Provider expected the fund value after 10 years
to be zero, as shown in the illustration which was provided with the policy document. The
Provider asserts that the Complainant availed of the automatic sum assured increase option.
Under this option, a policyholder is entitled to automatically increase the sum assured by
the greater of 7.5% or the prevailing rate of increase in the UK average earning index without
medical evidence.
The plan was reviewable on the tenth anniversary and every five years thereafter, to assess
whether the premium being paid at the time of the review would be enough to maintain the
level of cover chosen for a further five years. The Provider states that its actuary calculated
the required increase in premium for this additional cover. The Provider submits that it
stated in each of its review letters addressed to the clients, when the next review would
take place.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT