Aviva Medios Healthcare - are we being treated fairly?

anthony._2

Will someone please explain how Aviva seems to be getting away with ‘thieving’ over £100,000,000 from policyholders in ‘stolen’ premiums. If this was not 'white-collar crime' it would fill the front pages of every newspaper for weeks if not months.

I understand this is with the Aviva Team at the Financial Conduct Authority but why is that Team not acting? Is the Team waiting for other Teams to knock on its door shouting ‘foul’, ‘disgraceful’ and 'unfair competition'? Or is the Team waiting for someone higher up to notice what is going on as it cannot do its job? Who is telling who what? Why is Aviva allowed to run riot over City rules of honesty, propriety and fairness?

Surely the huge interest displayed on this Site must tell the Financial Conduct Authority that the ‘game’ is up. Too many people now know about what has gone on and there is nowhere left to hide. If inaction continues, the story will only get even bigger and become more about the Financial Conduct Authority than anything else, especially about its failure to protect consumers.

With Aviva left running riot over consumer interests, one realise that statements asserting the importance of consumer protection are only put out to help Market participants generate fortunes from consumers. The sad fact is that rarely does anything real come from complaints to the Authority and, instead, whistleblowers are ostracised and left increasingly vexed. That’s then covered up by research that ensures the right question is never asked about consumers’ overall view of the Financial Conduct Authority’s performance. If the Authority fails to react, its slogan of proactive regulation cannot be seen as more than meaningless sales chatter.

If selectivity is the reason for the Financial Conduct Authority’s inaction then we must worry as that means Regulation can only offer hit and miss protection without any safety net for things that go wrong, especially gaps in the system. If ‘thieving’ over a £100,000,000 is insufficient to warrant action then what help is there for all of us. That’s the reality for consumers BUT that reality will have consequences.

Letting financial providers run riot in this way will ensure consumers have no option but to withdraw from the Market. That’s because they can neither rely upon it nor have confidence in how it operates from one day to another.

No trust and no confidence means the Regulator will rightly be left with nothing to regulate, as no marketplace can survive if it can’t even get the support of its domestic consumers.

lambert3

Besides issues mentioned already by Posters that attended other City meetings, a further issue discussed at a meeting my organisation organised was whether Mr D had been naive to complain about a dead OHRA product. That was because we could not comprehend why anyone would choose to complain about a product that gave an insurer complete freedom to change both conditions and premiums when later issued Terms were much more limiting.

Certainly, Mr D’s approach did not set the Financial Ombudsman Service much of a challenge. The obvious room for manouvre encouraged the Service, with Aviva’s help, to adopt a blinkered approach. That led to the investigation of only one lead case, despite complaints having been lodged against 2 different policies. A farcical situation, although unsurprising based upon the poor quality and inexperience we have to put up with on a daily basis when dealing with the Financial Ombudsman Service. We would not be even surprised if the Service’s inadequacies meant it did not then realise that 2 policies had been complained about!

We then learnt the reason for policy buyers’ confusion. Aviva had misled them from the very start. It had written to them on 22 November 2000 and represented that its Offer Terms

“give the legal details of the transfer of your policy from OHRA UK to Norwich Union Healthcare, which will be effective from 1 January 2001”.

No wonder Mr D and others had believed their OHRA policies were being continued by Aviva and, instead, bemoaned Aviva’s non-communication and non-explanation of major changes to that policy.

Yet those people were entirely misled, as Aviva’s 2001 Offer Terms made absolutely no mention of any policy transfer but instead gave details of Aviva’s Formal Offer for the product it was then launching. Aviva had misrepresented the situation to potential policy buyers to enable it to sell its policy. Acceptors that did not fully read the provided documentation would never have known that no policy transfer was taking place. Possibly others might have worked out what was then happening, as this was clearly no standard renewal - as policy buyers had to affirm the truth and completeness of all information Aviva sought to rely upon, had to consent to various matters, and had to provide new payment authorities. Simply put, the OHRA policy was an annual renewable policy that was not re-offered and therefore died automatically at the end of the year 2000. Aviva then sent out fully documented Offer Terms for its own newly launched policy. However, even those understanding what had happened would not have necessarily remembered that detail some 11 years plus later, unless they had retained and referred to their aged documentation.

At the very least all consumers had to have been totally confused by Aviva’s policy transfer misrepresentation. As apparent, many must have believed they were renewing their OHRA policies as normal. The misrepresentations, made by the responsible subsidiary (Norwich Union Healthcare, which is now renamed Aviva Health), would have been even more believable as Aviva’s holding company had acquired OHRA’s ultimate holding company. Unless policy buyers were familiar with corporate structures, they would never have known that such a transaction could not affect the activities, rights, or responsibilities of individual subsidiaries belonging to either holding company.

When compared to the rightly given drubbing and punishment Wonga got for providing misleading information to customers, when collecting EXISTING debts, one is mystified as to why the Financial Conduct Authority has not acted earlier. Not only was the Aviva misrepresentation much more serious but it involved more than 3 times the damage in the form of improperly taken NEW premiums for 2001. Overall, Aviva’s misrepresentation amounted to a value of some 40 times more that Wonga’s, when other years are added in.

Unsurprisingly, Mr D’s complaint against the OHRA policy caused the Financial Ombudsman Service to give new life to an otherwise dead OHRA authority. Equally horrifyingly for other complainants, the Service kept that decision totally secret for 9 months, until late December 2013. Consequently, there was never any prospect of it being reversed, especially as Mr D never challenged the approach he actually advocated. Also the Financial Ombudsman Service’s focus on only Mr D’s lead case investigation ensured little else was possible. Apparently encouraged by Aviva, the Service had become transfixed with Mr D’s claim because of his involvement in the marketing of OHRA’s policy. A DISASTER that impacted dreadfully on all other complainants.

That is when we learnt the extent of Aviva’s deceitfulness. Instead of owning up to the fact that OHRA’s dead authority formed no part of its Offer Terms for 2001, Aviva stated in its infamous 8 April 2013 letter to the Financial Ombudsman Service that:

“We agree with your analysis of the position”

THAT HAD TO BE THE MOST DISHONEST RESPONSE POSSIBLE. Aviva knew it had issued Offer Terms for its new 2001 product offering. It knew policy purchasers had accepted those Terms and therefore knew those Terms were the only proper basis for the contract between insurer and policy buyers. Aviva also knew those Terms had to be the focus for policy buyers’ reasonable expectations, the ones the legally trained first ombudsman was so keen to consider – and which were set out in various Press articles. YET AVIVA CHOSE TO PRETEND THAT IT HAD NEVER ISSUED 2001’S OFFER TERMS. A LIE OF MAMMOTH PROPORTIONS.

As for all the talk about whether some takeover, limited acquisition or other arrangement influenced matters, we thought that mostly irrelevant. That was because it would not have even mattered if OHRA, and not Aviva, had issued those 2001 Offer Terms, as it was those 2001 Offer Terms that were binding. Any private arrangement between any OHRA company and any Aviva company could not have had any impact unless policy buyers were also parties to that same agreement - and, in this case, no such thing happened as nothing of that sort was mentioned in 2001’s Offer Terms.

However, we did think it was amazingly dishonest for Aviva to have claimed the right to OHRA’ dead authority when Norwich Union Healthcare (Aviva Health) and OHRA UK had deliberately excluded it from their limited arrangement, evidenced to us by Statutory Filings. That arrangement ensured all of OHRA’s rights, obligations and liabilities stayed with OHRA. That was the reason for Norwich Union Healthcare (Aviva Health) using the phrase “effective from 1 January 2001” when it represented in its 22 November 2000 letter that its Offer Terms

“give the legal details of the transfer of your policy from OHRA UK to Norwich Union Healthcare, which will be effective from 1 January 2001”.

According to the Statutory Filings shown us, everything and anything that happened before 1 January 2001 remained an OHRA right or responsibility, whilst Norwich Union Healthcare (Aviva Health) only took responsibility and benefit for everything IT DID with ITS PRODUCT OFFERING after that date. This was the complete opposite of what Aviva had claimed to have happened and demonstrates the extremes Aviva was prepared to go to avoid its commitments.

Aviva then did even worse when it actioned its dishonestly taken OHRA authority. We were shown how Aviva used it to remove flexibility and benefits and to fight off complaints against unauthorised policy changes and wrongful premium increases.

Incredibly, Aviva even sought to strengthen its deception for taking OHRA’s dead authority with the following misleading representation within in its infamous 8 April 2013 letter:

“Aviva Health became responsible for the Medios product in 2000 when we took over the book from OHRA, a Dutch firm, as a result of a number of corporate mergers”.

Gone was the fact that OHRA’s policies had automatically expired and ended when not re-offered after the year 2000 - therefore it was impossible and nonsensical for Aviva to claim “we took over the book” as no book remained. Gone was the fact (evidenced by Statutory Filings) that the only transaction between involved OHRA and Aviva subsidiaries ensured all OHRA’s rights, obligations and liabilities stayed with OHRA and had no impact upon any Aviva company. Gone was all mention of Aviva’s 2001 Offer Terms as they had to be hidden away from being noticed - especially as those Terms were the very opposite of those contained within OHRA’s defunct authority. Nor was any reference made to the Statutory Filings that further evidenced Aviva’s 2001 Offer Terms. Yet Aviva was well aware that it was only those 2001 Offer Terms that could govern the contract between insurer and policy buyers. It seems Aviva engaged in the most incredibly dishonest and misleading behaviour.

Readers also already know from other City Posters that Aviva used Claims Experience to cause premium increases, even though those costs were wholly Age-Related. Like other City Posters we learnt that Aviva’s apparent web of deceit went much further. Aviva lied and claimed that the Claims Experience, cited in its 8 April 2013 letter, was not Age-Related. It then belatedly admitted in that same letter that CLAIMS EXPERIENCE HAD ALWAYS BEEN CHARGED - making a lie out of every letter it had sent to policyholders between 2001 and 2011, every one having represented medical inflation as the only reason for premium increases. Whilst 12 years late with that incredible confession, Aviva then sought to support it by FALSIFYING the 2001 Offer Terms’ provision for premium increases. THAT FALSIFICATION WAS THEN ADOPTED FROM THE TOP TO THE BOTTOM OF AVIVA’S ORGANISATION. That all then became reality for every policy buyer when each of Aviva’s representations was accepted, without challenge, by a fooled Financial Ombudsman Service, prior to any complainant knowing anything at all about any of those representations. Aviva’s purpose was clear - it had to escape its commitments and downgrade the policy NO MATTER WHAT. Unfortunately, that means that every one that accepted Aviva’s 2001 Offer Terms ended up with a policy that was unrecognisable with the one they believed they had bought, and that has been the same for every year that followed 2001’s product launch. Aviva’s confession that protection from increasing old age claims (the cost of which comprises Claims Experience) had never been available made a lie out of its Guarantee, which promised that protection. That lie was concealed from policy buyers until Aviva’s confession was revealed in this Forum in 2014. That means policy buyers have been left helpless to do anything about this for every new premium demanded by Aviva. This was mis-selling at its very worst.

The wrongly superimposed OHRA authority, discussed in the first part of my comments, seems yet another lie to add to Aviva’s apparent mis-selling web of deceit. That OHRA authority stipulated the opposite of the 2001 Offer Terms actually accepted by policy buyers. Whether it is this or other City Posters’ earlier mentioned mis-selling, does not matter. Whichever direction one comes from, it is blatantly apparent that both mis-selling and misrepresentation took place for 2001 and has been repeated EVERY YEAR since.

There were further Aviva lies shown to us but I leave them for others to recount. As for warnings to Advisers, I make none as they, and nobody else, are responsible for fully complying with their PI policies.

Apart from the obvious need for redress to be made for all past misrepresentations and mis-selling, this policy is toxic as it does not provide the protection it guarantees - and has never done so according to Aviva’s latest confession. THIS CANNOT BE ALLOWED TO CONTINUE AS NOT ONLY IS THE FINANCIAL CONDUCT AUTHORITY NOW AWARE OF ALL OF THIS BUT MANY EXISTING POLICY BUYERS ARE NOT. As for Aviva being allowed to use the market as its personal fiefdom, to do as it wishes irrespective of all rights and wrongs and all other interests, that disadvantages all competitors and, as one of them, we must consider what action to take.

ianb24

Just a thought.

Maybe this is a pointer to the next development.

Does this mean, provided that all financial advisors are made aware of these allegations, that they are now under an obligation to point out to all their customers,renewal and new business, that Aviva are under investigation by the FCA for mis-selling and misrepresenting some of their products, or risk being sued on their own account.


Would they, as best practice, then have to recommend other companies products , positively dissuading customers from buying Aviva policies.
If adopted industry wide this could have a catastrophic effect on Aviva's sales and profits, and I would have thought, raise questions amongst shareholders, press and regulators.

I am just an ordinary policy holder from 1997 who, like others, was fobbed off by the FOS, and refused the offer of £600 "compensation".

PhilWard

A nice thought.

Advisers will have to do what their PI insurers tell them as they cannot risk losing cover now Aviva has put them at risk.

Some will reckon they are ok as FOS went along with large parts of Aviva’s defence and that will cause some of them not to bother to look at the advice they gave individual customers. Others will tell their PI insurers that FOS rejected complaints against Aviva and hope that limited explanation will keep them under cover. All those sorts of guys had better hope their PI insurers were not and will not be targeted by our guys – alas for them, it can be a small world when it comes to this sort of thing.

Advisers must also wait to see what Aviva has to say. Aviva might be chary of encouraging more trouble until things quieten down. That might cause them to defer ripping us off again or taking on FOS with more exit attempts. Mind you they are an arrogant bunch so who knows.

The only thing you can be sure of is that Advisers will not want to lose profitable business as they will be after your money whatever direction they go in. Also many are more sales focussed and keep their heads buried when it comes to compliance and things that go wrong. By telling us something is wrong they could cause trouble for past advice they have given. Probably the most important things will NOT BE SAID.

The FCA’s consideration of complaints does not mean that Aviva is under formal investigation. Maybe something will happen or maybe it will not. Our guys will be doing their best for all of us.

.Alex

The issues raised by campaigners on this web site caused us to invite them back for a second presentation, and some of our reactions have already been Posted on this web site. Our interest continued because the Regulator seems to have been hoodwinked into allowing Aviva to make-up its own rules and to run riot and unchallenged in the market. At the same time, we recognised that campaigners’ sought to reverse Aviva’s wrongdoings through getting the Financial Conduct Authority to do what it should be doing. We wholeheartedly support this campaign and strongly believe the Financial Conduct Authority needs to act before the next premium request if it is to avoid being seen to approve AN OBVIOUSLY TOXIC PRODUCT. Failure to act will badly dent the Authority’s reputation as many in the market now know what has gone on and will respond accordingly.

It’s hardly surprising everyone has got to this juncture given that the Financial Ombudsman Service was initially unaware of Aviva’s 2001 Formal Offer; in particular, that Offer’s restricted Authority to make policy changes and its stipulation on premium increases outside of the Guarantee. Initially, that came about because Aviva misled policy buyers through claiming policies had been transferred to it from OHRA - when nothing like that happened at all. Not only did that misrepresentation mislead buyers to accept Aviva’s 2001 Formal Offer but it was more recently used to misdirect the Financial Ombudsman Service away from Aviva’s 2001 Offer commitments. The second Ombudsman knowingly reaffirmed that misdirection when he claimed the OHRA Authority from the 1990s had remained unchanged until Aviva’s first Authority change in 2003 – some 2 years AFTER Aviva’s 2001 Formal Offer. Either the second ombudsman suffered a temporary reading lapse or he realised he needed to pretend that Aviva’s 2001 Formal Offer commitments did not exist in order to apply the First Ombudsman’s ruling – any other action would have meant jettisoning 2 years’ work, focussed upon the old OHRA policy from the 1990’s, and acknowledging that error (something the Financial Ombudsman Service never does).

As a result of this mess-up it was hardly surprising for that second Ombudsman redirected the matter to the Financial Conduct Authority, by claiming the regulation of premiums went beyond the Service’s remit. He similarly redirected the New Entrants’ complaint to the Financial Conduct Authority to avoid the embarrassment of choosing between the opposing unfairness of New Entrants having been excluded and Aviva’s misapplication of the extra premiums paid to cover future Claims. The inability to focus on the latter was extraordinary given that the payment of extra premiums to abate future claims made no sense unless Aviva applied those extra premium receipts for that purpose. The only real contribution the Financial Ombudsman Service made was to conclude that the Medios policy had been “clearly marketed as a long-term policy” – hardly a difficult concept given that most policy buyers could not benefit from their extra paid premiums until 11 to 20 years after they first purchased their policy and also given the consequential availability of life-time cover.

The only difference we have with lead campaigners is we doubt they can continue to rebuff the Press. We appreciate their concern that focus could be more on high profile participants than on what Aviva has done wrong. However, we think the huge interest in this site will increasingly force this story to transfer to other media.

If affected parties think it helps, we are happy for them to use this Posting when making a complaint to the Financial Conduct Authority.

Subsequent crucial events that NOW change everything
The Financial Conduct Authority did originally form a view of what had gone on. However, it stood back to let the Financial Ombudsman Service’s do its job. Now some 2 years plus later all can see that a great hole exists in the Regulatory system as a result of the Financial Ombudsman Service wanting nothing to do with Premium setting. The Financial Ombudsman Service also prefers to label everything else a management issue, mainly because it does not possess the skills, tools and power to challenge Aviva’s assurances, however dubious they are.

In addition, the following subsequent crucial events have occurred, which necessitate the Financial Conduct Authority re-evaluating its original assessment:

- the Financial Ombudsman Service’s late December 2013 pronouncement that the OHRA authority from the 1990s should apply to the policy even though there was absolutely no mention of it at all within Aviva’s 2001 Formal Offer, which instead set out limited authorities (a) to change the policy and (b) to make premium changes outside the Guarantee,

- the Financial Ombudsman Service’s late December 2013 pronouncement that it had relied upon Aviva’s assurance of having always charged for Claims Experience (and therefore also the authority to do that).

Clearly, Aviva fully exploited these subsequent crucial events. It used the OHRA authority from the 1990s to degrade the policy. It used the Claims Experience story to retain all premiums from 2002 onwards, notwithstanding ALL of its then premium requests having cited medical inflation as the premium increase reason. Buyers were then first told that Claims Experience was a premium increase reason in the 2014 premium request.

Another factor that could not have been reflected in the Financial Conduct Authority’s first assessment was the Financial Ombudsman Service’s unqualified conclusion that the Medios product had been “clearly marketed as a long-term policy”.

It is obvious that these subsequent crucial changes affect the entire nature of the Medios product and necessitate its re-evaluation.

Financial Conduct Authority’s original view that now needs to reflect subsequent events
We understand from a 13 June 2012 letter, provided to us by campaigners, that the Financial Conduct Authority’s original general assessment (when it was the Financial Services Authority) was that the policy was an annual renewable one that buyers could freely walk away from if they did not want to accept its renewal terms.

As for premium increases the Financial Services Authority’s detailed assessment was the opposite of the Ombudsman’s view. Consequently, if for no other reason than that, the Financial Conduct Authority has a duty re-examine its original assessment.

This detailed assessment came from no less than the Conduct Business Unit’s Director of Supervision. This is the Authority’s second most important Official (who holds the same position in the Financial Conduct Authority) and he concluded that “the clause explains clearly how often the premium will increase and how the premium increase will be calculated and then applied to policyholders”. He was so emphatic on this point that he emphasised that the relevant clause was “written in plain and intelligible language”.

How subsequent crucial events change everything
If solely for simplicity’s sake one supposes that the substantive evidence provided by campaigners to the Financial Conduct Authority causes no change to its initial assessment of an annual renewable policy, then we are left with the assertion that policy buyers can freely walk away from the policy. Both campaigners and us adopt this approach as subsequent crucial events easily demonstrate the walking-away assertion to have never been feasible because of resultant losses and because crucial information, that caused that need, was not available:

1. The policy had been “clearly marketed as a long-term policy”, according to the Ombudsman, with extra premiums having been paid in advance to abate future Claims Experience. The sole purpose of those extra premium payments had been to ensure future premiums would not rise for Age-Related matters. Consequently, walking away was never an option at it would have necessitated policy buyers writing-off those extra premiums, effectively paid as advance premiums to cover future claims. An aggravating factor is that all these issues were uncovered some 14 years following first policy purchase, which causes a massive inability to obtain existing illness cover from alternative providers. Besides which, there is no comparable alternative policy that is currently similarly marketed as a long-term policy.

2. Policy buyers would only have known from late December 2013 that OHRA’s authority from the 1990’s applied to Aviva’s 2001 Formal Offer as 2001’s Formal Offer made no mention of that 1990s authority - in fact 2001’s Formal Offer restricted changes to the policy and restricted premium increases outside of Aviva’s Guarantee. Consequently, buyers were never in possession of that vital information to enable them to walk away until late December 2013. Until then they had no knowledge that their policy could be turned upside down and made unrecognisable because of an old OHRA authority unmentioned and not even referred to in the 2001 Formal Offer Terms they had accepted in good faith. In all those years they had been caused to buy a policy totally different to the one they believed they were buying - something Aviva clearly knew about and clearly exploited.

3. Policy buyers only knew about the Claims Experience charge when 2014’s premium increase reason was sent to them. Up to then they believed they had been protected from Age-Related premium increases, specifically the rising cost of Claims Experience that came from Ageing. That was the reason they had paid extra premiums each year to benefit from Aviva’s Guarantee of no Age-Related premium increases. That very reason also differentiated the product from all others, and represented the product’s very essence and purpose. Obviously, buyers would have walked away if they had known they were being duped as has clearly happened. However, that crucial information was not only concealed from them but it was misrepresented one year after another with Aviva’s explanation that premium increases were for medical inflation – as also represented by the relevant provision from Aviva’s 2001 Formal Offer . Consequently, it has never been possible for policy buyers to walk away from this product for this crucial cited reason – even for 2014 as everything remained in limbo whilst complainants waited to hear what was going on with their original complaints.

Each of these 3 issues constitutes mis-selling. When they are combined, the resulting mis-selling goes off the Richter scale.

Why the Ombudsman could not consider mis-selling and was misled away from the same detailed conclusion reached by the Financial Conduct Authority’s Director of Supervision (when in that role for the Financial Services Authority)
We have all already learnt that the first Ombudsman was misled into focussing upon the old OHRA authority from the 1990s rather than the Aviva 2001 Offer Terms that buyers accepted and committed to. Obviously her ignorance of and non-focus on Aviva’s 2001 Offer meant she could never consider any mis-selling that resulted from that 2001 Offer. Nor did such mis-selling ever form part of any complaint she considered or knew about as relevant information only became known about after her ruling. We also know the second Ombudsman applied the first Ombudsman’s ruling to all claims.

Consequently, that wholly wrong direction is clear and is straightforward to untangle if the Financial Conduct Authority wishes to act. However, not acting does not seem an option as that requires the Financial Conduct Authority to ignore the ongoing sale of an obviously toxic product, which in turn means the Authority effectively becomes complicit in its sale by being seen to approve it – with increasing parts of the financial community and a huge number of consumers known to be watching, based upon the number of visitors to this site.

Next, to consider, is the reason the Ombudsman was misled away from the same detailed conclusion reached by the Financial Conduct Authority’s Director of Supervision with respect to premium increases. As will be seen below, this also directly impacts on the error the first Ombudsman made when she did not focus upon 2001’s Offer Terms.

First, one must observe that the premium increase issue was massive for Aviva. The extra premiums paid it to abate future claims were not used for that purpose as they should have been, even though it otherwise makes sense to pay to pay higher premiums. Instead, Aviva pocketed those monies for itself, by inflating its profits and using the extra profits for dividends and other self-needs. So by 2012 Aviva was suffering worsening Claims Experience from Ageing without the money that had been paid to cover such increases. And it was that which necessitated its major 2012 premium hike, with its cumulative effect on future years. The sums involved were massive and, therefore, so was Aviva’s motivation to hang onto its ill-gotten gains rather than claw-back the money from the funds it had taken and mis-applied for its own benefit.

In March 2013 Aviva’s problems worsened when the Financial Ombudsman Service rejected its explanation for 2012’s huge premium hike. That resulted in its infamous 8 April 2013 letter, with the belated substitute story of Claims Experience. Yet not only did the first Ombudsman preface her description of this action in her 9 September 2013 Provisional Decision with the words “rather oddly” but she must have realised that Claims Experience was an Age-Related cost covered by the Guarantee. So the question is what assurance was given to the first Ombudsman, by that infamous Aviva 8 April 2013 letter, that caused her to make a ruling that was the opposite to that reached by the Financial Conduct Authority’s Director of Supervision. Obviously it was overwhelmingly convincing as the first Ombudsman even deleted her words “rather oddly” for her Final Decision after a request to do that from Aviva’s Managing Director Health and Group Risk in a 9 October 2013 letter (he also affirmed the Aviva position set out in its 8 April 2013 letter!).

The assurance that convinced the first Ombudsman was Aviva’s 8 April 2013 representation that Claims Experience had been charged from the policy’s start. Five times in five different ways that representation was repeated in that infamous 8 April 2013 letter, in order to emphasise the point (each is detailed in Wallace101’s 20 August 2014 Post). However, on its own that representation was unconvincing, especially as it was contradicted by the Guarantee. Even the old OHRA authority from the 1990s was insufficient support as it is an uphill argument to claim a general authority took precedent over a specific overarching Guarantee not to charge for Ageing. So what Aviva did in its infamous 8 April 2013 letter was to claim that the product had been marketed on the basis that premium increases would be for “the cost of medical treatment increases on a year by year basis and premiums are increased to reflect the overall cost of claims and medical inflations”. Against that, the first Ombudsman had no choice but to accept Aviva’s right to charge for the overall cost of claims/Claims Experience, assuming she accepted Aviva’s representation as truthful – which she did as she did not know anything to the contrary.

Key deceptions Aviva practised upon the Ombudsman
Our compliance and legal people considered these critical representations from Aviva.

They concluded that Aviva’s confession of having always charged for Claims Experience had to be taken at face value as not only did that cause Aviva to retain past charges but they became specific for 2012, 2013, and 2014. Obviously, each premium increase explanation Aviva sent to buyers, between 2002 and 2011 inclusive, misrepresented the position – that should give buyers the right to claim rescission and damages. However, none of those letters was considered by the first Ombudsman and, again, the second Ombudsman imposed the first Ombudsman’s ruling on all other cases.

They also understood why Aviva had to represent that Claims Experience charges happened from the start as any subsequent introduction would have been be likely to fail against the initial overarching Guarantee that protected against Age-Related premium increases.

However Aviva’s representation that Claims Experience had been authorised from the start by a marketing statement is also where Aviva really does become unstuck, as that forces its 2001 Offer Terms into total focus. Accordingly, any investigator can identify where the marketing statement comes from, without room for any argument. Worse for Aviva, the relevant Offer Term states that “premiums are increased to correspond with the cost of claims and other inflationary factors”, which clearly limits increases to inflation matters. Against this, the only conclusion available is that Aviva falsified the marketing statement it represented in its 8 April 2013 letter to the Ombudsman – detailed comparison shows which words were deleted, added or re-arranged. Our compliance and legal people accept there might be a third Aviva story to explain this away but that would defy logic and credibility.

One is forced to conclude that the Ombudsman’s ruling was almost certainly based upon a falsified 2001 Offer Term. What that appalling deception also does is to provide total authority for the real Offer Term, which means premium increases must be limited to inflation. In addition, Aviva’s own focus upon its 2001 Offer Terms emphasises how wrong it was for the Ombudsman to focus upon the old OHRA Terms from the 1990s – again, Aviva misled on that.

Ongoing sales
Aviva acknowledges that its Guarantee of protection from Age-Related premium increases was based upon higher premiums up-front. Now some buyers discover there is no protection. Instead the increasing Claims Experience associated with Ageing is used as a basis for annual premium increases. Most other buyers have no idea about what is going on. They are all victims that have been scammed twice for aging charges. First for a guarantee that they will not be so charged. Then a second time to cover the annual cost of ageing. There could not be a more toxic product.

Havoc also rules in the market due to the further complications of Aviva having jettisoned its liabilities onto Advisers and their PI Insurers, who now need to take account of their exposure for past advice. Certain advisers remain taken in by Aviva and are in discussion on how to continue to make money from policyholders contributing to their profits – brokers, in particular, do not want to lose their customers.

Silence is not a viable option for the Financial Conduct Authority because of the obvious consequences that must follow. Silence would be like digging a deeper and deeper hole for all involved.

SEE CONTINUATION BELOW

.Alex

CONTINUATION

Public shock and disenchantment
The sheer enormity and persistency of Aviva’s wrongdoing must horrify the public. Investors’ and product buyers’ faith and trust in the financial system must be at risk. That is especially the case because of the involvement of the Financial Conduct Authority’s Director of Supervision. Not only does he set the image and tone of the organisation but if one of the organisation’s 2 top people is not prepared to put matters right, what hope remains for anything to do with the system.

That enormity and persistency of Aviva’s wrongdoings is shown by campaigners’ following complaints:

1. Misrepresenting that policy transfers took place in or around 2000 to cause the purchase of the newly launched product specified by Aviva’s 2001 Formal Offer.

2. Misrepresenting the Terms set out in Aviva’s 2001 Formal Offer as Offer documentation contains no mention or reference to the old OHRA Authority from the 1990s, which Aviva claims applies and which it has used to degrade this long-term policy out of all recognition.

3. Misrepresenting the Terms set out in Aviva’s 2001 Formal Offer as they stipulate Medical Inflation as the reason for premium increases whereas Aviva’s 8 April 2013 letter makes clear it was always its intent to charge for Claims Experience - an action it confesses it has taken every year since this long-term product’s 2001 launch (according to its infamous 8 April 2013 letter).

4. Covering-up and concealing the misrepresentation on premium increases, set out in the immediately preceding point, by misrepresenting the premium increase reason as medical inflation in each and every annual written explanation that preceded 2012’s.

5. Misapplying the extra premiums charged for this product’s lifetime Guarantee, which were solely paid to abate future claims but never used for that purpose.

6. Misrepresenting the authority change for 2003 (also affecting subsequent years) as “part of an industry wide initiative led by the Association of British Insurers (ABI) to achieve consistency of terminology..” without identification of that specific change and without explanation of its implications. The change was also ultra vires the change authority stipulated by 2001’s Formal Offer.

7. Making an unexplained change in 2005 to the potential policy duration of this lifetime policy, which was ultra vires the authority stipulated by 2001’s Formal Offer.

8. Misrepresenting the January 2010 stopping of New Entrants in subsequent Terms and using that misrepresentation to sell the policy. That misrepresentation was not corrected until 2014.

9. Applying a New Entrants’ rate since 2010 that could only be self-serving as it was not the market rate specified by the lifetime Guarantee stipulated by 2001’s Formal Offer.

10. Falsifying the 2001 Formal Offer provision that governs premium increases so it could dupe the Financial Ombudsman Service and falsely support the annual Claims Experience charges it confessed to in its 8 April 2013 letter.

11. Misleadingly causing the Financial Ombudsman Service to conclude that the OHRA Terms from the 1990s applied to complaints when it knew its 2001 Formal Offer Terms were applicable as it was those 2001 Terms that had been accepted by buyers.

12. Mis-selling the product as described above and as evidenced by recently discovered information as this long-term product could never have met buyers’ reasonable needs. Also concealing that mis-selling through persistent misrepresentation and through self-serving actions irrespective of whether such actions were lawful, regulatory compliant, authorised or appropriate.

The mis-selling complaint covers all Medios policy classes as they are all similarly affected.

We also know individual policy buyers lodged additional complaints – a notable one being Aviva’s misleading of a Member of Parliament and Government Minister to stop his dialogue with the Financial Services Authority’s Director of Supervision (a matter that also involved Aviva Holdings plc).

Remedy
Aviva’s falsification of a marketing statement to deceive the Financial Ombudsman Service has caused Claims Experience to be used for premium increases. That renders the Guarantee to protect against Age-Related premium increases absolutely pointless – akin to a situation where heads the buyer loses and tails Aviva wins. It removes the very essence and purpose of the policy. As for charging extra for the resulting worthless Guarantee, policy buyers might view that as a scam or even ‘fraud’.

Supplanting an old OHRA authority from the 1990s, that allows Aviva to do many things beyond the stipulated 2001 Offer Terms accepted, means buyers got an entirely different policy to the one they believed they were buying.

The remedy for mis-selling is clear in that all premiums need to be repaid with interest less any benefits received. Precedents abound with PPI. More recently credit card insurance has featured (the company concerned being CPP) for mis-sold annually renewable policies.

As far as the public are concerned they would also expect Aviva’s authorisation to be removed for this type of business - as allowing it to remain sends the wrong message on acceptable behaviour within this part of our Industry.

If a matter involving the Director of Supervision cannot get action what hope remains for consumers dealing with any of the Authority’s lesser Officials?

If Aviva is allowed to get away with all it has done wrong then what will it do next?

If the absence of prompt action, hundreds of thousands of investors and financial product buyers, in fact the entire British public soon, will learn that the Financial Conduct Authority knowingly allows Aviva to waive commitments and Regulatory obligations at will without fear of sanction. Consumer protection and the Regulator would become a joke as this matter is now firmly in full public view.

ATTACHMENT
DETAILS OF KEY CONTRACTUAL COMMITMENTS

From Aviva’s 2001 Formal Offer
The Aviva Guaranteed Loyalty Bonus:
“We guarantee that, whatever your age when you took out the Medios Healthcare Policy, you will never have more than one age-related premium increase during the lifetime of the policy. For example, if you join at age 29, when you reach 30 your premium will rise to the 30-39 age-band – no further. So you will never pay more than a new entrant aged 30 – even when you are 70! In our eyes you grow no older........This cover can be continued for life. And remember – unlike no claims bonuses, you cannot lose your Guaranteed Loyalty Bonus.”

“Does the Loyalty Bonus mean that I will never have an increase in premium?
Premiums are reviewed at the end of each calendar year. Historically, because generally the cost of medical treatment increases on a year by year basis, premiums are increased to correspond with the cost of claims and other inflationary factors. However, Loyalty Bonus guarantees that you will never be faced with more than one age related increase in premium under your Medios Healthcare Policy.”

Aviva’s falsified marketing authority used to charge for Claims Experience (sourced from the infamous Aviva 8 April 2013 letter)
“Will premiums go up?
There will be a general premium review at the end of each calendar year. Generally the cost of medical treatment increases on a year by year basis and premiums are increased to reflect the overall cost of claims and medical inflations, e.g. availability of new treatments and medical technologies.
However, the Guaranteed Loyalty Bonus means that you will never be faced with more than one age related increase in premium for each insured person under your Medios Healtcare policy.”

(This wording came from Aviva’s infamous 8 April 2013 letter, which falsified the above premium increase commitment set out in Aviva’s 2001 Formal Offer through deleting, adding and re-arranging words!!!!!!!!!!!)

New Entrants
Aviva stopped New Entrants in January 2010 but misled buyers by representing, within subsequently sent Terms, that New Entrants continued. For 2014 Aviva finally owned-up to having calculated and having then applied a non-market New Entrants’ rate without disclosing calculation details or criteria.

The old OHRA authority from the 1990s
“OHRA Ziektekostenverzekeringen NV is authorised to apply to current insurances any changes to conditions or premiums. OHRA Ziektekostenverzekeringen NV shall inform the policyholder in writing of any changes before the date of commencement of such changes.”

(OHRA Ziektekostenverzekeringen NV is a Dutch company that provides health insurance to the Dutch Civil Service amongst others. Statute law in Holland forbids Age-Related premium increases.)

LawMan

Policy buyers persist with cries of being scammed. Industry participants and competitors shout about an uneven playing field. Seemingly, almost everyone continues to allege mis-selling of the worst kind and a lot more besides. Such claims are based upon the policy having guaranteed that buyers would get lifetime protection against Age Related premium increases. However, the one absolute certainty is that the opposite took place. Not only was there no guarantee protection but policy buyers were charged Age Related premium increases every year from the policy’s start. Consequently, the question of fraud must arise as not only did the guarantee disappear as though it had never existed but the complete opposite of every reasonable expectation occurred. For many it would have been like purchasing some expensive type jewel that was subsequently discovered to be worthless paste. In this case it took 14 years for a few policy buyers to make that discovery; but the vast majority of policy buyers still remain blissfully unaware of what has happened.

The second Ombudsman, from the Financial Ombudsman Service, declared policyholders’ expectations to be “ideally” how “the scheme would operate in practice”. However, his support ended there. He followed and applied the judgement of a first Ombudsman, who concluded that Aviva had “shown that in fact premiums were calculated in accordance with standard practice and no part of the premium was allocated to cover the guarantee”. That crucial judgement depended and relied wholly upon Aviva’s representation that it had always charged for Claims Experience and had informed policy buyers of that intention from the start, through a Marketing Statement.

SO WHAT IS THE TRUTH AND IS ANY ACTION NECESSARY AND IF SO BY WHOM?

False representations or otherwise?
Common sense dictates that a guarantee to protect against Age Related premium increases has got to cover the increasing Claims Experience associated with Old Age. Otherwise such a guarantee makes no sense as it has no purpose. The need to cover Claims Experience is obvious from statistics issued by the Association of British Insurers, which show premiums rise by “around 3 times” from ages 35 to 70 because of increasing Claims Experience. That is easily understood by consumers as we all know that ill health affects a high proportion of the over 60s. Naturally, because of that, some consumers are prepared to pay extra costs upfront to obtain protection that avoids future cost increases when least affordable – on the basis that they can trust and rely upon a regulated provider.

In this case the provider of this cover was Aviva and its offered protection was the centre piece of its 2001 Formal Offer - fully evidenced and detailed by Offer Documentation under the heading of ‘Guaranteed Loyalty Bonus’. So policy buyers could trust and understand the offered protection, the Offer Documentation also provided the following information on premium increases:

“Does the Loyalty Bonus mean that I will never have an increase in premium?
Premiums are reviewed at the end of each calendar year. Historically, because generally the cost of medical treatment increases on a year by year basis, premiums are increased to correspond with the cost of claims and other inflationary factors.
However, Loyalty Bonus guarantees that you will never be faced with more than one age related increase in premium - - -“.

Equally importantly, the guarantee of no Age Related premium increases was unqualified and therefore buyers knew it covered all Age Related matters and excluded none. Also 2001’s Offer Terms promised that the offered cover “can be continued for life” and “you cannot lose your Guaranteed Loyalty Bonus”.

Extraordinarily, Aviva claims these Offer Terms do not apply. Instead, Aviva claims its guarantee was a limited one from the start as premiums would always be increased for Claims Experience. It repeated that claim many times in an 8 April 2013 letter to the Financial Ombudsman Service. The precise warning Aviva claimed to have given from the start was:

“Will the premium go up?
There will be a general premium review at the end of each calendar year. Generally the cost of medical treatment increases on a year by year basis and premiums are increased to reflect the overall cost of claims and medical inflations, e.g. availability of new treatments and medical technologies.
However, the Guaranteed Loyalty Bonus means that you will never be faced with more than one age related increase in premium - - - ”

Prima facie there is no doubt that Aviva’s claimed marketing statement was a false representation of its 2001 Offer Terms – the start of Aviva’s policy - as it was the complete opposite of what was then guaranteed to policy buyers. By putting forward that defence, Aviva also acknowledged buyers’ need to be aware of any proposed Charge for Claims Experience as, obviously, such a charge would either repudiate its 2001 guarantee or cause it to become ineffective and worthless.

Was false representation dishonest?
Whilst it is clear that Aviva’s annual premium increase for Claims Experience had to cause its 2001 Offer Terms to be false, false representations do not constitute fraud on their own. The complained about behaviour has to be regarded as dishonest by a reasonable person to constitute fraud. Also any fraudster must be aware of that impact as well as aware that he/she/it is being dishonest. Therefore a high standard is required to prove fraud, whichever the governing legislation – and that depends upon when the alleged offence(s) took place.

In considering whether the fraud standard is met, it seems clear that Aviva must have known its 2013 represented version of the premium increase reason would be viewed as dishonest as it was fully aware that version formed no part of its 2001 Offer Terms; in fact, 2001’s Offer Terms stated a totally different premium increase reason of medical inflation.

Prima facie, Aviva must also have known that it was acting dishonestly as significant effort was required to turn the relevant 2001 Offer wording into a version that rendered its guarantee ineffective. Words needed to be deleted, added to, re-ordered and represented. Common sense dictates that this must have been a thought through action and not something that accidentally enabled Aviva to avoid its guarantee liabilities. When implementing its action Aviva also had to know that every one of its premium review notices, up to and including 2011, stated that medical inflation was the reason for the premium increase. Consequently, Aviva was fully aware that its confessed actions caused its 2001 Offer Documentation to be false as well as to make false every annual premium increase notification up to and including 2011.

Aviva’s motivation for such dishonesty is also clear as otherwise Aviva had to be responsible for the huge Claims Experience bill. Instead it was taking for itself the extra premiums charged to policy buyers rather than setting aside them aside for the Claims Experience costs they were supposed to cover. As other Posts have commented this meant that policy buyers were charged twice - once for the guarantee and then again for Claims Experience. In devising this prima facie fraud, Aviva also had to claim that Claims Experience was charged from the start as any subsequent notification would have fallen foul of its overarching 2001 guarantee – also a principle enunciated by the Financial Ombudsman Service – which would have caused its scam to have been ineffective.

Not being caught is invariably the reason for many engaging in crime. For Aviva, deliberate falsification of the starting premium increase reason seemed to risk no chance of discovery. Firstly, the Financial Ombudsman Service was wholly focussed upon the OHRA Ziektekostenverzekeringen NV policy from the 1990s (and not on 2001’s Offer), as Mr D’s complaint was wholly focussed on that policy. Secondly, Aviva’s 2001 Offer was not even relevant as Aviva had misrepresented the starting position as a “transfer of your policy from OHRA UK to Norwich Union Healthcare, which will be effective from1st January 2001” (which was also supported by Mr D’s complaint). Thirdly, Mr D’s complaint was the only lead case being investigated by the Financial Ombudsman Service. Fourthly, the Aviva 8 April 2013 letter to the Financial Ombudsman Service, that potentially revealed all, could never be made available to any other complainant as the letter concerned Mr D’s personal case.

However, Aviva’s prima facie fraud was uncovered when Mr D disclosed in a 9 March 2014 Post on this web site that “I have used the Freedom of Information act to obtain from the FOS copies of all correspondence between the FOS and AVIVA relating to my personal case”; he had made a similar comment in a Post a week earlier. Everyone on this site then knows what happened - the correspondence came into the public arena and Aviva’s prima facie fraud has been increasingly learnt about from that moment on. With over 340,000 having already visited this site, it seems a lot more will be learning about it in the future.

Aviva’s use of the falsified version of its 2001 Offer wording is not precluded by any of the above. Aviva’s own story is that it was confined to Marketing Literature. If so that meant it was never included in the Terms & Condition changes sent each year to continuing policy buyers. That meant it was hidden from them, especially as they could only then rely upon the original 2001 Offer documentation, the provided Terms & Conditions changes, and premium review notifications – each one, up to and including 2011, having represented that only medical inflation was the premium increase reason.

Independent investigation of Aviva’s use of the wording it used to mislead the Financial Ombudsman Service will, nevertheless, provide added awareness of what went on. If it was introduced after or around January 2010, when New Entrants were stopped, that would add to Aviva’s dishonesty as no marketing purpose or need remained. That could also be said of any earlier introduction, as existing customer numbers fell from around 20,000 in 2001 to a present yearly trickle of some 2,000 – so effectively there were no significant numbers of new customers with any interest in Marketing Literature, whether new or old. Effectively, the claimed marketing statement was prima facie a deliberate artificial creation for a dishonest purpose. Obviously, uncovering the time when the falsified wording was introduced will uncover the extent of Aviva’s apparent deception.

The only information policy buyers from 2001 have about Claims Experience being a premium increase reason was that it was combined with medical inflation as the premium increase reason in 2014’s premium review notification. On its own, without reference to the overarching guarantee contained within 2001’s Offer Terms, that was wholly inadequate for that year or for any future year, and certainly not for any preceding years.

Relevance of any authority or of the policy’s duration?
Whether or not Aviva had the authority to a change the policy upside down, sideways or any other way is not relevant to the above analysis. Nor is it relevant whether the policy was annually renewable, sold as long term, or otherwise. That is because fraud is concerned with what representations were made to cause a purchase, whether those representations were false and dishonest, and whether the seller’s intent was to make a gain or cause a loss. Mis-selling is similarly concerned with what was actually represented to the buyer.

Gains made by Aviva from its actions?
Over £100 million in premium revenues have been taken by Aviva from sales of this product. If the product had been offered on the basis that prospective buyers could appreciate its guarantee was ineffective and worthless, then no significant revenues could have been generated as it would never ever to suit any buyer’s reasonable needs.

The persistency of Aviva’s actions, stretching over 14 years, together with the huge amount of money involved, must demand the heaviest of penalties in the event of a fraud prosecution. Such action would be directed at the companies concerned and also at the people involved. Clearly, any involved person could not fulfil the Financial Conduct Authority’s fit and proper test for Approved Persons.

Action required, the FCA’s role, and others
Prima facie this matter ticks all the boxes associated with fraud. Consequently, there is a duty to report the matter to the police so it can be investigated. Other complained about wrongdoings, identified by the immediately preceding Post, are also likely to be investigated as they concern Aviva’s honesty or otherwise – ultimately, they might form part of any ensuing Court proceedings, dependent upon prosecution tactics. A resulting police report will be passed to the Crown Prosecution Service to determine whether a prosecution should take place.

Action Fraud is the UK’s national fraud and internet crime reporting centre and complaints need to be forwarded to that organisation – just insert ‘Action Fraud’ or ‘fraud’ into your search engine. Helpful documentation will be the full 2001 Offer documentation, available annual premium letters, and Aviva’s 8 April 2013 letter. The co-operation of one of the following seems to be required for the latter: the Sakagawea Team, Mr D, the Financial Ombudsman Service or the Financial Conduct Authority. The police will ensure none of these parties hinders their work.

The Financial Conduct Authority should already have reported this matter to the police as its discretion is limited to its Rule Book. It seems likely that at some point the Authority will also need to explain its actions concerning the past and ongoing mis-selling of a product sold on the back of a useless and worthless guarantee. Associated matters will also require action. For instance, the predecessor Authority could have come to some rapprochement with Aviva following Aviva’s misleading of a Member of Parliament and Government Minister around mid 2012. However, whatever was done or not done afforded Aviva the opportunity to continue to charge for Claims Experience for 2013 without provision of any explanation to policy buyers. Instead Aviva concealed it had always charged for Claims Experience until it was forced to reveal it had done that, some 4 months later, as a result of the Financial Ombudsman Service’s March 2013 rejection of 2012’s huge premium increase. Current market uncertainties concerning this product seem neither desirable nor appropriate for a regulated market.

Advisers will need to ensure they are not and have not been involved in furthering any fraud.

PMW2012

An interesting development this week.
My MP has received a response from "The Director of long term savings and Pensions Supervision Division"
It would appear that this matter is now finally being dealt with by the appropriate section of the FCA who deal with "long term" products....and not annually renewable products.
Someone has perhaps looked back at the historical authorisation of this product by the DTI at last and should be investigating where all the money policyholders paid in which should have been placed in reserve and not allegedly taken as profit.

fraud-investigator

What LawMan explains is a prima facie fraud.

Aviva’s 8 April 2013 confession appears to leave no doubt that its 2001’s Offer Terms were false and dishonest. The same goes for every premium increase explanation Aviva issued between 2002 and 2011.

Aviva seems to have perpetrated this prima facie crime by manipulating and changing wording from 2001’s Offer in order to negate that Offer’s Guarantee. If Aviva’s recreated wording had really existed at that time, there would have been no take-up of the policy and therefore no further income in following years. Newspapers and advisers would also have made sure of that as Aviva’s actions were spotlighted at the time.

The dishonesty practised upon policyholders seems as bad as that can get. As the money involved was huge and Aviva’s misdeeds persistent, the companies and executives concerned should rightfully fear maximum penalties. That goes too for any that helped or are continuing to help Aviva walk away from its liabilities in this way.

Policyholders must thank the Freedom of Information Act for uncovering the crucial letters that evidence this prima facie fraud. Those letters enabled professionals to work out what Aviva did. Without the letters and without professionals’ efforts, Aviva would have escaped proper scrutiny. Unfortunately, supposed guardians, such as FOS, are not given the powers or tools to verify what is said to them. They solely have common sense and intuition to counter relatively unlimited resources and skills available to large Corporates that seek to fool them when major amounts of money are involved, as seems to have occurred on this occasion.

This is not all that was wrong with what took place. OHRA’s old authority was dead and buried but Aviva caused it to be born again by exploiting Mr D’s confusion about what had happened. Instead of the 2001 Offer for a long-term product that permitted only standard terms to be altered, policy buyers ended up with a policy that permitted Aviva to do anything, including destroying the policy. This further prima facie fraud was equally as bad as a worthless Guarantee, sold as a hugely valuable one. It enabled Aviva to do almost anything with the policy irrespective of the representations and promises made by 2001’s Offer Terms. Aviva knew that as it claimed it had that authority from the policy’s start even though it also knew its 2001 Offer represented almost the entire opposite, by stating only standard terms could be altered.

When these two prima facie frauds (negating the Guarantee and replacing a limited authority with an unlimited one) are brought together, the extent and persistence of the connected Aviva actions seem horrific. Consequently, nothing less than maximum penalties for all concerned seem appropriate.

On the different matter of civil damages, the numbers are likely to be far higher than anything previously mentioned. It is not only the premiums and Guarantee that policyholders lost. They also lost the ability to obtain cover for existing illnesses at standard cost, as Aviva knowingly deprived them of that opportunity when it concealed its misdeeds for 14 years. Compensation for this is especially relevant as Aviva used the threat of that exact same risk to cause its policy to be purchased – that threat was contained in the last 2 sentences of the 22 November 2000 Aviva covering letter that accompanied its 2001 Offer. The aggregate cost of providing lifetime cover for these existing illnesses can be expected to be colossal.

Aviva must be brought to account fully for what it has done, for the sake of every market participant. It seems to have total disregard for the System the market depends upon as well as total disregard for ethics per se.

InsurerFD

In a letter dated 2 December 2014 Aviva has told policyholders that premiums have been increased for Claims Experience for the second year running - this time by 9%. Apparently, the letter was held-back as it has only just been received by many.

Only people who complained to the Financial Ombudsman Service know that Claims Experience was also used to increase premiums for 2012 and 2013. Only web site visitors know policy buyers were duped even more as Claims Experience was also used to increase premiums from the policy’s 2001 start – that revelation was uncovered when the Financial Ombudsman Service released an Aviva 8 April 2013 letter in response to a Freedom of Information Act request.

Each one of those increases for Claims Experience conflicts totally with Aviva’s 2001 starting promise of total guarantee protection against age related premium increases. Each one conflicts totally with every annual premium increase explanation Aviva gave in the 2002 to 2011 period. Small wonder there are increasing cries of prima facie fraud from consumers and of unfair competition from other industry providers.

WHAT DOES EVERYBODY DO ABOUT THIS LATEST SITUATION?

The Financial Conduct Authority
Consumers continue to wait for some sign, any sign, from the Financial Conduct Authority.

Courtesy of PMW2012 and his Member of Parliament they know the matter has been referred to the Authority’s Long-Term Savings and Pensions Supervision Division – which explains the Authority’s delay in getting to grips with what has gone on.

The Authority’s referral to its Long Term Division is not because the DTI classified Medios type business as long-term in 1999 or before, as PMW2012 suggests. It is because the Financial Ombudsman emphasised that the policy had been “clearly marketed as a long-term policy” in the Mr G Case Decision.

The Authority will focus on the alleged distortion and falsification of the crucial marketing wording from 2001’s Offer terms. That fraud needs to be proven for the secondary false accounting allegation to become relevant – concerning Aviva not having made provision for future claims relating to past premiums. That’s because Aviva’s falsification of 2001’s Offer wording causes responsibility for future claims to be passed to policyholders – under that scenario, the Guarantee had no purpose as the falsified 2001Offer wording meant no protection was provided irrespective of protection having been charged for.

So far consumers must view the Financial Conduct Authority’s complete lack of transparency as deeming them of no worth and of no interest despite the Authority’s desire to be seen as a consumer champion. Unfortunately, this is the system the Authority uses, irrespective of it detracting from market confidence and causing consumers to disappear from further market involvement. Whilst that approach desperately needs to change, if only for the Authority’s own sake and standing, that is not going to happen in the short-term.

Other industry providers are onlookers. Each might complain to its own national regulator about the favouritism and competitive advantage shown Aviva, but any action or retribution will be informal as the Financial Conduct Authority already has or has been offered all necessary evidence.

The Financial Conduct Authority’s investigation must focus on its Rulebook. Fundamental to the Regulatory system and a key focus will be its number one Principle of conducting business with integrity, which available evidence shows Aviva to have not only ignored but to have deliberately abused. Other areas of focus will include the Authority’s all important Business Standards, which require policies to offer eligible benefits with policy terms, main benefits and exclusions being communicated so clients are able to make informed decisions. Not only does ALL that seem to have been deliberately not complied with but Aviva seems to have actually set out to mislead clients about the policy. Overall, it appears Aviva went far beyond ripping-up the Authority’s Rulebook, as absolutely no limit was placed on the lengths it went to dupe clients. Consumers and other industry providers, alike, must be spellbound by Aviva’s utter contempt for the entire Regulatory system, for the marketplace, and for business standards and ethics generally.

Anything but strong action with leave all market participants in complete doubt about the Regulator and its attitude to consumer protection and to renegade Firms – a recipe for complete market mayhem.

Alleged Fraud
If the prima facie fraud allegations have been reported to anti-fraud authorities then the law will take its course.

Further implication for Aviva
Aviva’s proposed Friends Provident deal is already under the spotlight as the acquisition conflicts with Aviva’s promulgated strategy. Listing Particulars will need to be issued to shareholders and they will include information on claims against Aviva. Also fraud allegations of any kind are not only significant but crucial when it comes to the market sentiment and confidence necessary for such a deal to happen. Consequently, it will be interesting to see how the Medios situation is dealt with by all relevant parties. If mishandled and losses arise FOR ANY REASON then baying institutional shareholders will run riot.

Whether to pay 2015’s premium?
The most imminent issue is for consumers to decide whether to continue their policies by paying 2015’s premium. Recent events mean that decisions need to take account of premiums available from other providers. However, the probability is that more complex decision making will be involved as Aviva hid its alleged fraud for some 14 years. Many policyholders will be unable to obtain cover for existing illnesses at standard prices. If alternative short-term insurance is not available at competitive prices, for all sorts of reasons including the availability and cost of existing illness cover, then that is likely to restrict alternative cover arrangements or, more likely, prohibit them entirely (long-term equivalent products are known not to be generally available). Again, Aviva has knowingly inflicted this problem on policyholders through hiding its alleged fraud for 14 years. Each policyholder will have to consider their individual circumstances and needs. Advisers embroiled in any way in the alleged fraud will need to be avoided. That similarly applies to Advisers that know about what has gone on but have not brought relevant issues to policy buyers’ attention.

Inevitably in cases of alleged fraud, some policyholders will be more driven by a desire for justice rather than by immediate financial priorities. Rightly or wrongly, they might want to do the opposite of what Aviva wants them to do!

The following is available information about what Aviva wants.
1. Aviva deliberately pushed the Medios business into a spiralling loss situation. It pushed away large amounts of business through massive premium increases. In turn, that ensured remaining income could not cover overheads. Aviva knew that from the actions it took for 2012 (see Note below). Nonetheless, Aviva continued hiking premiums in subsequent years to cause further policy lapses and even larger losses. That strategy drove away profitable business. Captive business remained, characterised mainly by continuing claims and non-profitable policies. Driving the business into the ground in that way only made sense for Aviva if the Medios business could be terminated in the short-term. Therefore Aviva needed to speed-up premium increases to cause no policy take-up and to shut down spiralling losses. That is the real purpose behind 2015’s premium increase, which could have been more but for the Financial Conduct Authority’s interest.

2. In its 8 April 2013 letter to the Financial Ombudsman Service, Aviva represented:

“We have considered closing the Medios book and therefore no longer offering a product with a GLB. When considering this option we sought feedback from customers and intermediaries, many of whom have the Medios product themselves. The feedback was very much against removing the GLB, and we have therefore sought to maintain the Medios product, including the GLB, in the interests of our customers. To this end we have invested in infrastructure and systems to seek to build a sustainable product to the benefit of customers who wish to retain the plan.”

“This ... demonstrates ..our continued desire to manage this book of business in the interest of the customers.”

The background to this was Aviva’s attempt to replace a rejected reason for 2012’s premium increase with a new one, in the hope it could reverse an Adjudication decision to repay a 12% over-charge for 2012 (and its repetition in subsequent years). As the rejected reason was the policy’s non-viability because of “under-pricing”, Aviva’s thought it also necessary to offer the assurance that it was committed “to retain the plan”. That also fitted in with the life-time cover commitment.

However, once Aviva got the Ombudsman to reverse the Adjudication decision with its new reason, it questioned the then need to stand by its previously given commitment to maintain the Medios product. That led to the Aviva Managing Director Health and Group Risk writing the following to the Ombudsman on 9 October 2013:

“We are concerned that some of the language used (in the Ombudsman’s Provisional Decision) could be interpreted that the Ombudsman is prejudging any complaint which might be brought were Aviva to close this product in the future....

...we would ask you to review and revise the section....where ... the following has been stated:

‘I would be concerned if the policy was withdrawn without a comparable alternative being offered’.

...there is no requirement anywhere in the terms and conditions of the policy or in law for Aviva to offer a ‘comparable product’ should we choose not to sell this annual product in any given year ...

We are required to review the viability of the product taking into account our commercial requirements, the interests of those who wish to purchase the product and also the interests of those who have other products with us.

We cannot subsidise a product at the expense of other policyholders”

Aviva’s Managing Director knew perfectly well that it had caused a spiralling loss situation through its 20% premium hike for 2012. Resulting policy lapses meant it was not possible for remaining income to cover overheads. Effectively, 2012’s premium hike meant Aviva killed its own business and was planning to shut it down as fast as possible. Any Industry participant would also have known that, given Aviva’s forceful statement that it “cannot subsidise a product” and given the scale of its self-inflicted wound (revealed by Aviva in its 8 April 2013 letter):

“... to ensure the sustainability of the product a 52% increase in premium was required ..”

“We took the decision not to increase by more than 20%, in the best interests of our customers (the 20% being 2012’s premium increase)”

Note
According to Aviva’s 8 April 2013 letter, 2012’s 20% premium hike led to a 24% policy lapse, which killed underwriting profits and caused large losses (2011’s underwriting profits of £376,000 collapsed to losses of £674,000 for 2012 – a results turn-down of over £1million).

The conclusions are that Aviva:

- does not want policyholders to continue with this policy,

- will do its utmost to bring the policy to a speedy close so as to stop its self-created losses multiplying,

- has no bounds for dishonesty as also now shown by

- its assurance that the policy will be maintained (to add credibility to a change in evidence) and then reversing that with its next comment following acceptance of its changed evidence,

- replacement of the rejected reason for 2012’s premium increase (of a single non-permitted “under-pricing” correction) with a new found mechanism for permitting increases WHENEVER required (only made possible by Aviva’s falsification of 2001’s Offer wording),

- has no qualms about how far it will go to rid itself of all liabilities associated with this long-term product.

Delay in the Regulator acting
Sadly, the longer this situation is allowed to continue unabated and uncorrected, the greater will be the negative impact on London’s reputation as a world leading financial and insurance centre.