Life Insurance Paid Out to wrong person/estate.

Keith

Hi,

I'm not sure if anyone can offer any advice on this.

My wifes grandmother died in 2010.

The life insurance company wrote to my FIL regarding 2 policies, both policies had the correct first name & surname but incorrect middle name.

He queried and was advised that the policies were correct and that he should send in a death certificate and they would pay out.

He did, they did. Everyone was happy.

4 years later, FIL receives a letter, we made a mistake you owe us the cash back, c£6k.

I've written to them asking how this mistake could happen and they've said that they received a letter from the Grandmother without a policy reference on it and from that letter changed the wrong persons policy over.

They've kindly offered to take £1k off the total repayable.

Now, the problem is, FIL can't possibly pay back £5k as he doesn't have it, MIL isn't working at the moment as she is recovering from bowel cancer surgery.

I/they accept they must repay it back. FIL wants to pay back £20 a month which will never be accepted because of his age.

I was thinking perhaps sending a letter offering 50% with a statement of affairs showing how little he has coming in and can repay per month.

My concern is that they own their house outright & have two cars but no savings.

Any advice would be appreciated.

Thanks
Keith

InsideInsurance

Given that your grandmother did write to them then presumably she did indeed have a policy with them. What happened to that one? Presumably the £6k is the difference between her actual policy and what was paid out?

I am no life expert but in other cases where I've had to recover outlay from a private individual a fairly pragmatic view was always taken. Even tiny offers of repayment were considered as long as the supporting information, including bank statements etc showed that this was a reasonable amount based on their circumstances.

I've no experience to assist on if you could challenge the repayment beyond saying that if he is unhappy then a complaint and subsequent referral to the ombudsman is always an option.

dunstonh

Legally, you have no entitlement to benefit from a mistake. However, the general rule of thumb is that money should be repaid over a similar timescale to how long it took to spot the mistake. In this case 4 years.

The firm may decide that taking money back over a long period is too costly for them and may be willing to accept a smaller lump sum to get rid of the problem.

vaio

dunstonh wrote: »

Legally, you have no entitlement to benefit from a mistake. However, the general rule of thumb is that money should be repaid over a similar timescale to how long it took to spot the mistake. In this case 4 years.......

Is that correct?

I've certainly seen cases where banks & employers have failed to recover with the two main issues being, was the punter aware it was a mistake (or I guess should they have been aware) and have they (reasonably) spent the money.

dunstonh

vaio wrote: »

Is that correct?

I've certainly seen cases where banks & employers have failed to recover with the two main issues being, was the punter aware it was a mistake (or I guess should they have been aware) and have they (reasonably) spent the money.

it comes down to reasonable expectation. If you know its a mistake then you have no hope. if you genuinely believe it to be correct and can show that (showing it is easier said than done at times), then you can be entitled to keep it depending on what you have done with the money. So, it is partly grey.

The pensions regulator says that you are not entitled to benefit from a mistake.

http://www.pensionsadvisoryservice.org.uk/common-areas-of-concern/mistakes-and-overpayments

The Financial Ombudsman says much the same but gives more examples. It says that ordinarily, customers should repay money that does not belong to them, or that they have borrowed. But customers do not have to repay it if they have "changed their position" through believing, in good faith, that the money was theirs - for example, by buying some expensive service that they would not otherwise have bought. Merely spending the money on ordinary, day-to-day expenditure does not amount to a change of position. If customers have changed their position, then they are not required to show that, if they repaid the money, they would be worse off than before they received it. But it must still be the case that it would be unfair for the customer to have to repay the money.

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/33/credits-33.htm

Keith

Thanks for the replies, I was under the impression that undue enrichment applied above all. The FCA guide is interesting as I believe they spent the money on a new TV they didn't intend to buy and us a family car as we found out the wife was expecting.

vaio

looks like they tick both boxes for not having to pay it back....

honest & reasonable belief that the money was theirs and they spent it as windfall by buying things they wouldn't have bought had it not been for the money

In you position I'd certainly be arguing the cash is not recoverable

Keith

Finally convinced the in laws to go to the FCA rather than getting a loan to repay the payout.

Heard today it will take 8 months to process!

dunstonh

Finally convinced the in laws to go to the FCA rather than getting a loan to repay the payout.

The FCA do not handle consumer complaints. It is the FOS that they need to go to.

Keith

Sorry FOS as above and as advised by the insurance company

magpiecottage

I would recommend going to FOS. Say the payment was accepted as correct in good faith four years ago and long since been "dissipated" (i.e. spent) and, after all this time it is neither fair nor reasonable to expect them to repay it.