Sanlam must refund premiums paid on a life cover protection plan a customer complained she was sold unnecessarily because she was single and had no dependents at the time.
According to a Financial Ombudsman Service decision, the complainant, Ms M, was recommended the Sanlam life cover plan prior to the Financial Services Act 1986, which led to investment advice being regulated.
However, the decision says she only recently became aware the cover was unnecessary recently.
An adjudicator initially upheld the complaint and said that even though the recommendation was made prior to the legislation, it still needed to represent a “reasonable fit” with the consumer’s circumstances.
The decision says: “So even though this was a pre-regulated sale, the business shouldn’t have sold Ms M a plan that, in practical terms, wasn’t needed.”
The adjudicator found the protection plan was a complex product and could operate either as a whole-of-life plan or, if a minimum sum was assured, as a savings plan.
However, the FOS decision says: “Because of the way it worked, [the adjudicator] didn’t believe Ms M would’ve simply walked into one of Sanlam’s offices and
asked for such a complex product. At least some discussion about her needs would’ve occurred before she was handed the product.”
Sanlam did not agree with the adjudicator’s decision and said there was no evidence one of its advisers recommended the plan.
Sanlam said Ms M already held three savings plans and was well-informed. The firm also said the complainant understood the nature of the life insurance, and was provided with clear documentation.
Ombudsman Tony Moss agreed with the adjudicator and upheld the complaint. He says there is no “persuasive evidence” Ms M needed life cover at the time of the sale.
Moss also agreed with the adjudicator’s decision regarding the recommendation taking place before the 1986 legislation.
He says: “Advisers’ requirements Pre ‘A’ day were considerably less than they became afterwards, however, I’ve seen no evidence to indicate the adviser did seek to establish whether Ms M wanted or needed life cover – or why she allegedly chose the fund in question.”
Moss also says Ms M’s purchase of three other insurance plans should not have been an indication she was actively considering life cover.
He says: “This was a relatively complicated product and required making choices about various options including between selecting from a range of funds. I think it is more likely than not that a Sanlam adviser led her through these options.”
Sanlam has been instructed to refund the premiums at the Bank of England’s base rate plus one per cent.