Fianna Fáil Finance spokesperson Michael McGrath has called on the Central Bank to investigate the alleged mis-selling of whole of life assurance policies. Whole of life assurance policies involve customers purchasing cover that provide a lump sum in the event of their death as well as purchasing units in an investment fund. The policies typically have a premium review clause after an initial 10 year period and then each subsequent 5 years up to age 70 and annually thereafter.
Deputy McGrath stated, “Alongside taking out a mortgage, whole of life assurance is one of the biggest financial decisions that many people will undertake. Despite the significance of such policies, they actually get relatively little attention in public debate. This is often due to their perceived complicated nature.
“According to information I have received, 836 complaints of mis-selling of whole of life assurance have been made to the FSO in the last five years yet the Ombudsman has confirmed that “no findings in relation to mis-sale of Whole of Life policies have been issued by his Office in the past five years.”
It would be nice to think that this is because of a perfect record on the part of financial services institutions in respect of the sale and administration of such products. However, it is clear that many people have been shocked to find that, when their policy review takes place, the premium can, in some circumstances, be increased by 100% or more. In many instances, it is apparent that it was not made clear to customers at the time they first took out the policy that they could be subject to massive increases in the monthly cost. Customers are then faced with the dilemma of whether to pay the higher premium or cancel the policy and forego the benefit of the premia they have already paid. They may end up with inadequate or no life assurance coverage at all.
“The fact that no adverse findings have been made against companies selling whole of life assurance, despite concerns about the operation of the sector, indicates a potentially serious gap in the current legislative powers of the FSO (six year rule). The Central Bank last year completed a review of the sale of payment protection insurance policies and found massive irregularities with €67.4m being repaid to circa. 77,000 policyholders. I believe a similar review is needed of the sale of whole of life assurance policies to ensure that customers are fully informed of the product they are purchasing and, where this has not happened, that appropriate sanctions are put in place. However, as I have consistently stated, there is also a need for a change in the law in relation to time period in which customers can make complaints to the FSO.
“The long term nature of many financial products – including whole of life assurance, payment protection insurance policies and endowment mortgages – means that problems often only emerge well beyond the six year limit. It is grossly unfair that these consumers are being prevented from having their case heard by the FSO. The result of the rule is also that financial services firms who have mis-sold products to unsuspecting consumers can continue to get off scot free.
“Fianna Fáil has published legislation to deal with this issue. The Bill proposes that, from the time a person becomes aware of a problem with the financial product, they would have three years to lodge a complaint with the FSO. We are calling on the government to make the necessary change in the legislation to deal with this injustice currently being experienced by thousands of consumers of financial products.