Whole-of-Life Decision Reference 2024-0142

• Case Outcome: Partially upheld
• Year: 2024
• Date: 25 June 2024
• Reference: 2024-0142
• Finantial Sector: Insurance
• Conducts Complained Of: Claim handling delays or issues,Dissatisfaction with general customer service, Settlement amount (life)

Decision Ref:

2024-0142

Sector:

Insurance

Product / Service:

Whole-of-Life

Conduct(s) complained of:

Claim handling delays or issues

Dissatisfaction with customer service

Settlement amount (life)

Outcome:

Partially Upheld

LEGALLY BINDING DECISION OF THE FINANCIAL SERVICES AND PENSIONS OMBUDSMAN

On 30 July 2002, the First Complainant and his late wife incepted a Mortgage Protection

Plan with the Provider with an initial sum assured of €500,000.00 (five hundred thousand

Euros). Some eighteen years later, sadly, on [mid] 2020 the First Complainant’s late wife

died, and the Second Complainant is her Estate.

This complaint concerns the Provider’s calculation of the death benefit payable following

the death of the First Complainant’s late wife, and the customer service it proffered, in

dealing with the First Complainant’s ensuing queries and complaint.

The Complainants’ Case

The First Complainant, in his Complaint Letter to this Office dated 30 December 2020, says

that when he and his late wife purchased the Mortgage Protection Plan with the Provider

in July 2002, “we were told the policy would mirror a home mortgage and were issued with

a policy confirmation and policy booklet”.

Because, in 2002, the First Complainant and his late wife were sold this Mortgage

Protection Plan (‘the policy’) by a third-party financial service provider, and not by the

respondent Provider, the elements of the Complainants’ complaint relating to the sale of

the policy, or the information provided by this third-party to them, in and around the time

of the sale in 2002, do not form part of the formal investigation of this complaint against

the respondent Provider.

- 2 -

/Cont’d…

The First Complainant says that in 2014, he and his late wife repaid their mortgage loan in

full, and that they “took a decision to keep the policy active and become the

owner/beneficiary of the policy”.

The First Complainant’s late wife died on 2 June 2020 and on 10 June 2020 he notified the

Provider of his intention to make a death benefit claim under the policy.

The First Complainant notes that on 9 July 2020, the Provider issued a death benefit claim

payment in the amount of €260,693.00 (two hundred and sixty thousand six hundred and

ninety-three Euros).

The First Complainant says that according to his own calculations, which he made “using

the standard loan amortization used by Irish Banks and the variables listed in the policy”,

the death benefit claim payment he had received from the Provider was “approx. 2.5%

lower” than the amount suggested by his calculations.

The First Complainant says that he immediately queried the calculation of the claim

payment with the Provider, and he notes that on 3 November 2020, the Provider admitted

that it had made an error in its calculations and that a further amount of €81.41 (eighty-

one Euros and forty-one Cents) was due.

The First Complainant notes that at the time, the Provider also offered him an additional

Customer Service Award Payment of €250.00 (two hundred and fifty Euros).

The First Complainant says that he returned the additional death benefit cheque payment

of €81.41 to the Provider in December 2020 and he also advised the Provider at that time,

that he was declining its Customer Service Award offer.

The First Complainant does not accept that the total death benefit claim payment

calculated by the Provider in the amount of €260,774.41 is correct, or that this figure

would have covered the outstanding mortgage loan at the date when his late wife died (if

they had not previously paid off their mortgage in full).

The First Complainant sets out the Complainants’ complaint in his Complaint Letter, as

follows:

“…It is our contention that the amount determined by [the Provider] for our policy

claim is below what would be calculated by a standard home mortgage using the

same variables. This has resulted in a substantial underpayment to us …

While waiting for the claim to process, I calculated the amount due using the

standard loan amortization used by Irish Banks and the variables listed in the policy.

When the claim payment was received it was approx. 2.5% lower than the amount

anticipated and I immediately raised a query with [the Provider] on 13/07/2020.

- 3 -

/Cont’d…

The query process was very slow and seemed to be going nowhere, I then requested

the matter to be elevated to a complaint and expected a better reply turnaround

within the published timeline for processing of formal complaints [as set out in the

Central Bank of Ireland’s Consumer Protection Code 2012] by [the Provider]. This

process was again dragged out and the amount of emails back and forth is

substantial – there finally came a point that [the Provider] acknowledged a

miscalculation had occurred and they offered a Customer Service award of €250 on

top of the €81.41 miscalculation (as calculated by [the Provider]). This amount was

far less than the amount that I had calculated and I rejected this offer.

… I believe there are questionable calculation practices in play by [the Provider].

The result of these methods is that I feel effectively cheated from the amount

expected under the terms of the policy. Additionally [the Provider’s] Customer

Service fell far below what would be expected from a financial institution and it

took 129 days from raising a query to getting to the point of referral to your office”.

In addition, in his letter to this Office dated 23 July 2021, the First Complainant notes that

the Provider furnished him with an explanation of its mortgage reduction calculations and

a spreadsheet setting out its monthly calculations across the policy term of 25 years, and

in this regard, he submitted that:

“1) In [the Provider’s] reply to explain why [its] mortgage reduction calculations

differed from the standard mortgage reduction method, [it] supplied [a]

spreadsheet…on 17/11/2020 …

This comparison of mortgage reduction calculations ([the Provider] v’s Standard) is

worthy of attention for the following reasons;

- Both methods use the same interest rate variables, i.e. start with the same

€500k value and end with zero. These are the only two intervals both methods

align.

- When the differences in the monthly reductions are compared … concerns and

questions about the methods used by [the Provider] in the Sum Assured

reductions emerge. Every month, with the exception of two (month 297 and

299), results in a benefit less than the actual mortgage balance. When charted

… significant differences emerge – that can be clearly seen to penalise a

mortgage protection policy holder more or less excessively, dependent on when

they may institute a claim along the 300 month timeline. In the case of this

complaint, the key month is 215, and represents a heavy penalty point in the

charted curve. This is unfair on the consumer and an underlying penalty method

appears to be embedded within [the Provider] computations. Further

concerning is, if for example, a claim had been initiated in month 297, the

assurance policy benefit exceeds the actual mortgage amount. There appears to

be a hasty calculation adjustment routine in play – within the formulas – that

has the only intention of levelling the values near the end of the timeline …