The power to settle financial complaints.
The power to settle financial complaints.
Whole-of-life polices are designed to provide a sum of money (the "sum assured") to the consumer’s family or estate when the consumer dies. The consumer pays either a lump sum at the outset or a premium every month.
As the name implies, whole-of-life policies are intended to remain in place for the remainder of the consumer’s life. However, some policies do not require the consumer to keep paying premiums beyond a certain age.
Whole-of-life policies sometimes provide other benefits to the consumer – for example, cover for specified illnesses or disabilities.
Most of the complaints we see are about a particular type of whole-of-life policy known as "reviewable policies". This is the type of policy that this section of the website focuses on.
With a reviewable whole-of-life policy, the financial business invests some of the money that the consumer pays. The amount that the consumer is required to pay – and the "sum assured" – are set on the basis of certain assumptions about what will happen in the future, including how well the investment fund will perform.
These policies normally have "review dates" when – if things have not gone as well as expected – the financial business may ask for the contributions to be increased, or may suggest that the "sum assured" is reduced.
These policies usually accrue a value as time goes by. This means the consumer can cash in the policy. Because of this, financial businesses sometimes recommend whole-of-life policies for savings purposes – or where the consumer wanted savings and life assurance together.
When we look at complaints about whole-of-life policies, we consider whether:
We will not uphold a complaint just because the consumer was asked for more money – or was told they will have to accept a reduced "sum assured".
Our approach when we consider complaints about whole-of-life policies is set out in the following sections:
Consumers sometimes complain that they needed life assurance only for a limited time – but that the policy they were sold committed them to paying for life assurance until they die.
We are likely to uphold a complaint if we find that, when the policy was sold, it was known that cover would be needed only until:
Mr and Mrs B were in their 40s and had two children. They said they required life assurance in case one of them died – so that there would be money to help support the surviving partner and the children. The financial business advised them to take out a whole-of-life policy.
Mr and Mrs B later complained because they felt they had been sold something that did not match their needs.
We saw that the documentation completed at the time of the sale supported what Mr and Mrs B told us – in other words, that they needed the life assurance only to be in place until their children were 21. We also found that Mr and Mrs B’s pensions would provide for the surviving partner should one of them die after retiring.
It seemed to us that Mr and Mrs B's needs could have been satisfied in a cheaper and more appropriate manner – with simple term-assurance (which the financial business could have provided) ending at their anticipated retirement dates.
We upheld the complaint. We told the business to compensate Mr and Mrs B for the amount they had been paying over and above what they would otherwise have paid for term assurance for the same sum assured.
We also told the financial business to provide the term assurance to Mr and Mrs B without their having to provide evidence of their health – and with the same premium that they would have paid if they had taken it out on the same date as the whole-of-life policy.
Where a consumer says that life assurance was not needed at all, we will consider their personal and financial circumstances at the time the policy was sold. We would be likely to uphold a complaint where the consumer was young, single and living at home with no dependents.
If the consumer had dependents or debts that they wanted to protect, we would take into account how much cover they had before taking out the policy (for example, any cover provided by an occupational pension).
We also see cases where consumers say they took out a whole-of-life policy as a savings vehicle – for example, to help put money aside for a future house purchase. If we are satisfied that the consumer’s priority was to save or invest, we will look at how much the life assurance element of the plan cost. Where those costs were significant – and might affect the ability of the plan to provide the savings needed – we are likely to uphold the complaint.
We sometimes see cases where a policy was sold with the intention of providing cover for a potential inheritance tax liability when the consumer dies. Where this has happened, we will look at whether the policy could continue to provide the cover in the long term. If that was unlikely, we would usually uphold the complaint.
We see cases where the consumer complains that the underlying fund the policy was investing in was too risky.
Investment funds present a range of risk – and each individual fund is different. We will consider the features of the fund, together with the consumer’s own circumstances, before reaching a view on whether the fund was suitable.
There is more information about how we approach this issue in the section of our website on assessing the suitability of investments.
Consumers sometimes complain that they were not told a review could happen – or that the potential consequences were not explained. In these cases, we will take into account all the available evidence, including:
If we are satisfied that, on the balance of probabilities, the consumer’s attention was brought to a clear and understandable explanation of the review process, then we are unlikely to uphold the complaint.
Mr C started a whole-of-life policy to provide life assurance for his wife and children. He was happy that he would, potentially, have to pay for it until his death.
After 10 years the financial business carried out a review of the plan. It told Mr C that he would either have to double his contributions to maintain the same level of cover – or significantly reduce the life cover provided by the plan if he wanted to keep paying the same premiums.
Mr C complained that he had not been told when the policy was sold that it would be reviewed – and that he might be asked for more money. The business said that the potential for reviews had been disclosed in the policy conditions.
We examined the paperwork that had been given to Mr C. We found that he had been provided with several different documents, some of which did not apply to his policy. Some of the paperwork gave the impression that the premiums would be "level" in the future – rather than the impression that the premiums might be altered.
The potential for reviews was mentioned in the policy conditions. But it was not given any prominence, discussed in great detail, or explained in a clear and understandable way. There was no mention of the reviews in any of the other correspondence sent by the business.
We upheld the complaint because we had not seen enough evidence that the financial business had made Mr C aware of the reviews and their implications.
We sometimes see complaints where the business did not carry out a review when it said it would – and the consumer says they would have surrendered the policy, or taken out additional life assurance, had they been made aware of the problems earlier.
In these cases, we ask the business what the results of the review would have been, if it had been carried out at the right time – and what it would have advised the consumer.
If we find that the review would have revealed that no action was necessary – or that the policy was performing as expected – we will examine the policy conditions. Where these say that the consumer will not be contacted in these circumstances, we are unlikely to uphold the complaint.
But if the business would have said that the consumer needed to contribute more – or reduce the sum assured – we will consider what the consumer would have been likely to do, on the balance of probabilities.
If we are satisfied that the consumer would have surrendered the policy, we usually tell the business to pay compensation on the basis of:
If the current surrender value is higher than the historic surrender value (plus premiums plus interest), then we would not tell the business to pay compensation – because the consumer would be no worse off by simply surrendering the policy now.
Where we are satisfied that the consumer would have taken out alternative cover – because they still needed the life cover that the whole-of-life policy was providing – we may make a deduction for the cost of the life assurance provided by the policy from the date that the review should have taken place.
If we are persuaded that the consumer would have taken out another policy – which is now more expensive than when the review should have been carried out – we may tell the business to pay additional compensation to recognise that extra cost.
If we decide that the consumer did not need life assurance at all, we are likely to say that the business should refund all the payments made to the policy, together with an appropriate rate of interest.
There is more information about the rate of interest we apply in the section of our website on compensation for being "deprived" of money and for investment loss.
If we decide that the consumer would have taken out some other form of life assurance instead, we are likely to tell the business to pay similar compensation – but deducting the cost of the life assurance provided by the mis-sold policy or the cost of a more appropriate policy.
If the mis-sold policy provided other benefits that the consumer would still have needed (for example, critical illness cover), we may also deduct the cost of these benefits.
If the business provided a different policy – where the "sum assured" could not be changed – and we are persuaded that the consumer would have taken out this policy instead, if they had been aware of the implications of the policy reviews, then we might say that the business should reconstruct a non-reviewable policy using whatever assumptions and costs applied at the time of the sale.
Because these policies tend to be more expensive, we would not take this approach if the consumer:
If we take this approach, we are unlikely to say that the consumer should now be asked to pay the extra costs that would have accrued, if the new premium had been in place from the start.
Alternatively, we may ask the business what "sum assured" could have been provided on a "non-reviewable" basis for the premium the consumer is now paying. We would then say that the "sum assured" should be fixed at that level – and the consumer will continue to pay the same premium.
If we are satisfied that another type of life assurance (for example, term assurance) would have been more suitable, then we might say the financial business should:
contact our technical advice desk on 020 7964 1400
This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.