FOS raises concerns over whole of life policies- Update with additional stats
The Financial Ombudsman Service has raised concerns about the levels of complaints it is receiving about reviewable whole of life policies.
In a comment piece in the Daily Telegraph, Financial Ombudsman Service lead ombudsman for investments Caroline Mitchell says the FOS received about 1,400 complaints about whole of life policies last year. Out of these, 33 per cent were upheld.
The FOS received 1,690 complaints about whole of life policies during 2009/10, 28 per cent of which were upheld.
Mitchell says many consumers complained that it was not made clear to them when they took out the policy that their premiums would be reviewed and could increase significantly after a set period of time.
Mitchell adds: “We expect businesses that sell reviewable whole of life policies to explain clearly that these policies are subject to review – and to point out the effect that any review might have on a consumer’s future premiums.”
She also says that a small number of complaints revolved around whole of life policies taken out for inheritance tax planning that had not been put in trust for the beneficiaries of the estate. She says the FOS would expect the business selling the policy to create the trust or to check if the policyholder has made their own arrangements for this to be done.
The Telegraph reports the anger of readers who have recently seen their premiums increase significantly with some being forced to settle for far lower policy benefits.
The FOS says it is unable to provide a breakdown for which distribution channel accounts for the most complaints about whole of life policies. However, last year complaints about whole of life policies and savings and endowment products accounted for 21 per cent of total investment complaints.
Overall 44 per cent of investment complaints last year were made against life insurance and investment product providers. A further 21 per cent of investment complaints were made against banks, and 14 per cent were against IFAs.