Advisers are calling on the FSA to investigate the way providers communicate the terms of reviewable whole of life policies after the Financial Ombudsman Service raised concerns about complaint numbers.
In 2010/11, the FOS received 1,400 complaints about whole of life policies and upheld 33 per cent. In 2009/10, it received 1,690 complaints about the policies, with 28 per cent upheld.
Lead ombudsman for investments Caroline 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.
She says: “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.”
O’Halloran and Co senior partner Terence O’Halloran says: “This is something that the FSA should be investigating. There is an inherent problem with unit-linked whole of life policies because insurers can take extra premiums from clients when they are not required.
“We complained to the FSA about this 12 months ago but so far it has done nothing. This is a huge consumer detriment issue.”
Wingate Financial Planning director Alistair Cunningham says: “As a temporary solution, a whole of life policy can be suitable for IHT purposes but it is inflexible and serves a limited purpose.”
The FSA declined to comment.