Fianna Fáil Finance spokesperson Michael McGrath has expressed concern over possible mis-selling of whole of life assurance. These are policies where customers purchase cover that provides 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, “People have been shocked to find that, when the 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 Financial Services Ombudsman (FSO) has recently completed a review of the sale of payment protection insurance policies and found massive irregularities. This has resulted in compensation payments to many customers who were sold unsuitable products. 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, 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.
“One of the shortcomings of the investigation of the sale of payment protection insurance was that it only covered those policies sold after the Consumer Protection Code came into full effect in July 2007. This means that many people have lost out if they became aware of the potential mis-selling more than six years after they initially took out the policy. I believe that thousands of people may have lost out on compensation as a result of this rule. In fact a UK company Stanton Fisher, which handles PPI claims, has described the scale of mis-selling as being potentially the “biggest financial scandal in Irish history.
“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.
“Last year, Fianna Fáil published a Bill 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.”