“I have had the same joint life insurance policy with my wife with the same insurance company for the last 23 years. Earlier this year I received a letter from the insurance company informing me that if I wish to continue with my policy, I will have to increase my premium threefold. I recently got a quote from another broker with the same insurance company for the same cover for a lot less than my broker told me he could do it for. I have had various issues with the insurance company and/or broker over the years such as under-charging on my premium, not reviewing my policy, not cancelling a policy when requested and not returning calls or explaining my options. I am totally disillusioned with the insurance industry after paying approximately €22,000 for the last 23 years with nothing now to show. I have been informed that the surrender value of my policy is now a couple of hundred euros whereas it was a couple of thousand euros five years ago when I should have had a review and been advised to cash it in. Have you any advice?”

It appears that you were sold a whole-life insurance policy as distinct from a term-life insurance policy. These policies first became popular back in the 1980s and had the appeal of offering those looking to get life cover the chance of saving money too. The structure of such policy means that premiums are invested in unit-linked funds, with the principle being that money grows at a certain rate thereby providing an element of protection to the life insurer and gives a surrender value in the event that the policy is cancelled.

The savings element of the fund offers a little lump sum should the policy holder wish to cancel the policy or a buffer for the life company to dip into once the policy holder ages before they start hiking up the premiums. However, as with all fund investments, the value is not guaranteed, which means that it may not grow by enough to pay for life insurance during the policyholder’s life.

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Hike in premiums

A whole-life policy protects you as long as you keep making the premiums, whereas a term life insurance policy lasts for a specified time such as 20 or 30 years. Unsurprisingly, given the scope of its cover, whole-of-life insurance cover tends to be very expensive, with a 30-year-old paying approximately six times more than they would for mortgage protection cover which only protects the amount outstanding on a mortgage. There are two types of whole-of-life insurance policies available on the Irish market – guaranteed and reviewable. Under a guaranteed policy, your cover will stay static and your premiums will not change, thus guaranteeing you the indicated payout when you die. Under a reviewable policy, which appears to have been the policy which you were sold, premiums are subject to review and the amount you pay each month can be increased or the cover reduced. Typically, a premium is up for review after 10 years and every five years thereafter. Once the policy holder turns 60, the review should happen annually and the cost of premium will likely jump substantially. If the policyholder does not pay the increase, then the cover will decrease.

Grounds for complaint

If you feel that you were mis-sold a reviewable policy, you may have grounds for complaint. However, under the six-year time limit that applies, the Financial Services Ombudsman cannot investigate mis-selling as this happened at the time of the sale of such a policy, which was sold typically in the 1980s and 1990s. Indeed, statistics show that since 2010 there have been 836 complaints with respect of whole-of-life insurance but none has gone in favour of the consumer on the grounds of mis-selling. In the UK, where no time limit is in place, the UK Financial Ombudsman has reported that from April to May 2014 the office received 1,963 new complaints about whole-of-life policies and it found in favour of the consumer in approximately 24% of those cases.

That being said, the Ombudsman should investigate a complaint about your broker in respect of the last six years of service. Examples of grounds of complaint include not reviewing the policy as required, not paying agreed bonuses at agreed times, not cancelling policies when requested, not dealing with queries and complaints in a standard way and being aware of problems but not helping the customer or not informing the insurance company. However, the complainant must exhaust internal complaint procedures with the broker/insurance company before the Ombudsman will deal with the complaint. Further information is available on the Ombudsman website www.financialombudsman.ie.

Continuing insurance cover

In the meantime, you may have no other option but to shop around or if you cannot afford the increased premium accept less benefits for a lower price. Anecdotally people who have shopped around with an independent insurance broker have found that under the same company for the same policy they were being charged less if they were a new customer. This is because it attracts business for the insurance companies to have lower prices for new customers. Unfortunately, it is often the older more loyal customers that pay for this cheap insurance as they are less likely to question why something is more expensive the longer they have been with the broker/insurance company.

Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising. E-mail ameehan@farmersjournal.ie