What is insurance mis-selling?
When a provider sells any insurance product, they have a duty to act in the best interests of the customer.
This means ensuring the product is suitable for your circumstances – and that you have a genuine need for the cover. You must also be given accurate information on the terms and conditions of the policy.
If an insurer fails to do this, they could be could guilty of mis-selling.
What is life insurance?
Life insurance is designed to ensure that your mortgage and other bills will still be covered if the policyholder dies prematurely.
Often sold alongside mortgages, life insurance is an important product for anyone who has a partner or children who depend on them – and can offer great peace of mind.
How can life insurance be mis-sold?
While cases of mis-sold life insurance are not very common, they can happen. When they do occur, they often involve firms mis-selling the cover with mortgage applications.
You may have been mis-sold if:
- You were told – or it was strongly implied – that you had no choice but to take out the cover. Life insurance is extremely valuable if you have a mortgage, but it is not compulsory. If you were subject to ‘pressure selling’, you may have a case for compensation
- The terms and conditions weren’t explained to you properly
- You were sold a policy you aren’t able to claim on
- You were given bad advice on the best type of cover or sold more cover than you need. This might be the case if, for example, a provider only told you about ‘whole of life’ insurance – generally a more expensive form of life cover – and not ‘term’ cover. ‘Whole of life’ cover is a more complex type of life insurance that will pay out when you die, no matter what your age is, whereas ‘term’ cover pays out a lump sum if your death occurs within a fixed period. If the provider failed to make it clear there were cheaper alternative options – which may have been more suitable for your needs – you may have been mis-sold
Can I claim compensation for life insurance mis-selling?
If you have been mis-sold life insurance, you should have grounds to be able to claim compensation.
What can I do about mis-sold life insurance?
If you think you may have been mis-sold life cover, go back through your paperwork to look for any extra costs for insurance policies you agreed to – scrutinising mortgage paperwork carefully.
If you are confident that you have been mis-sold a life insurance policy, there are several steps you can take. You should start by:
- Compiling a list of reasons why you think you may have been mis-sold
- Gathering together any evidence to support your claims. This might include details of how you purchased the policy, and what the provider told you when you bought it
How to complain about mis-sold life insurance?
If you want to make a complaint about life cover mis-selling, you should first take your complaint to the company which sold you the insurance policy. You should do this using its formal complaints service.
Your complaint should clearly set out in writing why you think your policy was mis-sold, and include any proof or evidence you have of this mis-selling. Once a provider has received a complaint, they have eight weeks to deal with it.
Tips when complaining:
- Always post photocopies and not originals of important documents. Alternatively, scan them and send them by email
- Keep copies of any correspondence
- If you speak to people on the phone, keep records of conversations along with times and dates – and note down who you spoke to
- Hard as it may be, try and remain polite and in control at all times
- Don’t give up at the first hurdle. Perseverance will pay off
What if my complaint is rejected?
If your mis-sold life insurance complaint is rejected by your provider, you may be able to lodge an appeal, and may be successful second time around.
Equally, if you’re still unsuccessful, you might want to consider escalating your complaint to the Financial Ombudsman. The Ombudsman is a free service which works to resolve disputes between a consumer and a company when they are unable to settle a complaint between themselves.
If you do want to go down this route, you need to be aware that you cannot take your case to the Ombudsman until eight weeks after lodging your complaint with your provider. Once you’ve lodged your case with the Ombudsman, they will then decide whether or not to uphold your complaint.
Note that in many circumstances, you can complain about mis-selling that happened up to six years ago – even if you no longer pay premiums, and even if you no longer have the cover in place.
What compensation can I get for mis-sold life insurance?
If your claim is accepted by your provider – or upheld by the Financial Ombudsman – you can expect to get a refund including the cost of all your premiums for the time you had the policy, as well as interest charges.
What about PPI mis-selling?
While cases of life insurance mis-selling are thankfully relatively rare, cases of Payment Protection Insurance (PPI) mis-selling are a lot more common.
PPI was an insurance policy sold to cover repayments on debts (such as cards and loans) in case of accident, sickness or unemployment. But in the past it was routinely mis-sold to people who didn’t need it or couldn’t use it – such as those who were self-employed, unemployed or retired when they took out the product.
The banking regulator, the Financial Conduct Authority (FCA), set a deadline of 29 August 2019 as a cut-off for starting a new complaint on mis-sold PPI. This deadline has now passed, though you may still be able to submit a re-claim if you missed the deadline due to exceptional circumstances.
That said, don’t assume this will be possible, as banks will decide this on a case-by-case basis.
Should I use a claims management company?
While you may be tempted to use a ‘no-win, no-fee’ company to help you claim compensation for insurance mis-selling, be warned that many of these firms will take a hefty share of any refund you get in return for their services.
By contrast, if you fight your own battle and a claim for a refund yourself, you won’t have to hand over any of your compensation.
Compare life insurance
Even though some providers are tempted to mis-sell life insurance policies, the vast majority of insurers and policies are legitimate – and they are often extremely valuable under the right circumstances.
MoneySuperMarket can help you find the right life insurance policy with our comparison tool. All you have to do is provide us with a few important details on your circumstances and we’ll do the rest.