Life Assurance - Help!

theflowerpotman

Hello everyone. My mother-in-law recently passed away and we discovered that she had a policy with Phoenix. The policy was taken out in the mid 80s (with a different company, now taken over by Phoenix). The premium was around £12/month and she took it out at around the age of 67. The value of this policy is around £1900. I am unable to understand how Phoenix could continue to take premiums well after MIL had paid far in excess of the policy's worth. Simple sums, allowing for a modest 2% annual growth, would suggest she had paid the £1900 in premiums around the mid nineties and, by the time of her death, again assuming 2% growth, her 'contributions' would be worth in excess of £5000. Is this normal practice? It would seem to me to be blatant exploitation of an elderly, and subsequently very unwell woman. She died both deaf and blind. Her estate is insignificant - she would have been very upset if she thought she was, in effect, throwing money away. Any comments would really be most welcome.
Thank you.

stephenni1971

YOU seem to be under the impression she was investing her money when in fact she was purchasing insurance. There is every possibility with a policy like this premiums could exceed benefit - the same is the case now with AXA SunLife plans advertised on TV with a free pen or alarm clock!

The insurer has done nothing wrong or unethical, they sold a product ( and back when she took it out there was little regulation around most financial products ).

theflowerpotman

Thanks stepenni1971,

I take your point that this was not an investment per se, however, I still believe that dodgy ethics are involved here. MIL also had a policy, taken out in Australia, in the mid 50s. The company there stopped taken premiums several years ago. Surely the company should be somewhat behoven to tell the insured that she had paid three times more than the policy was worth?

And, she didn't get a free pen!

opinions4u

Would it have been unethical to accept a payout of £1,900 if she'd died at the age of 70, having only paid £400ish in premiums?

Think about it.

theflowerpotman

Of course not but I think you may be missing the point. I am not trying to make some kind of killing out of this. Financially I neither need to nor wish to. My sole point is that the insurance company's needs were more than adequately catered for 15 years ago, surely there must be some point where they can acknowledge that a client has paid them enough?

Of course MIL could have been run over the day after she took the policy out. However, she was not. That is the gamble both sides take out with any new policy. I believe she was miss-sold and clearly did not understand the terms of the policy. Average life expectancy of women in the UK is 82. Policy would pay for itself when MIL was 79. So who is taking the gamble?

dunstonh

however, I still believe that dodgy ethics are involved here.

Would it still be unethical if she had died after paying 1 premium?

That is the risk with these types of plans. If you live a long term you could end up paying more. If you live a short time then you only pay a little.

My sole point is that the insurance company's needs were more than adequately catered for 15 years ago, surely there must be some point where they can acknowledge that a client has paid them enough?

Some plans do have a maximum age where benefit is kept but premium ceases (typically around 80 to 85)

However, your mum wasnt just paying for her death. She was buying insurance and that means it is the collective cost of all deaths on average. The people that live the longest pay for those that die early.

Of course MIL could have been run over the day after she took the policy out. However, she was not. That is the gamble both sides take out with any new policy.

Spot on.

I believe she was miss-sold and clearly did not understand the terms of the policy.

With respect, your belief is irreverent. It was pre-regulation and this is how these plans work (and still do on new versions bought today). There is nothing to complain about and no-one to complain to (as it would be the broker you would need to complain to). The broker would not consider the complaint as its pre 88. Not only that, you were not present at any meeting and are not in a position to say what was or wasnt said or what info was provided.

Average life expectancy of women in the UK is 82.

not in the 80s it wasnt.

opinions4u

theflowerpotman wrote: »

Of course not but I think you may be missing the point.

I'm not missing the point. Some life assurance contracts include an element of investemnt. Some don't.

The simplest for of life assurance charges a premum and pays out a lump sum when somebody leaves this mortal coil. If it happens early, the life assurance company loses. If it happens late, they gain.

I have a policy that expires in 5 years time. Unless I die in that period, I will have lost every penny I've paid in to it. It's not a scandal. It's what I agreed to.

I am not trying to make some kind of killing out of this. Financially I neither need to nor wish to.

I'm not saying you are. But what did MIL sign up for? A lump sum on death in return for a monthly premium? If so, that's what's happened.

My sole point is that the insurance company's needs were more than adequately catered for 15 years ago, surely there must be some point where they can acknowledge that a client has paid them enough?

If a policy is expensive, it's expensive. Waitrose charge more for groceries than Asda. It doesn't mean they've mis-sold me PG Tips though.

Of course MIL could have been run over the day after she took the policy out. However, she was not. That is the gamble both sides take out with any new policy.

I don't think that's in dispute, is it?

I believe she was miss-sold and clearly did not understand the terms of the policy.

Was she even sold it, or did she just ask for it?

Average life expectancy of women in the UK is 82. Policy would pay for itself when MIL was 79. So who is taking the gamble?

That's the actuarial calculation of the life assurance company to ensure all liabilities can be met, factor in a bit for increasing life expectancy and retain a bit of profit.

I'm not a fan of life assurance for smallish sums assured targeted at older people. I don't think it offers great value for money. Certainly not the type of plan advertised by aging TV personalities on daytime telly. But as long as it does what it says it will do for the price agreed I can't see any case for saying it was mis-sold or some sort of compensation is due.

If she'd wanted to stick £12 a month in a savings account she could have done.