Scottish Provident SelfAssurance - Missold?

kat71

Hi there,
There have been a number of threads on Scottish Provident self-assurance policies but it seems the answers are different depending on individual circumstances. So I am posting in case anyone can help.

My mortgage broker sold me a Scottish Provident Self-Assurance policy in Sept 2004. It was for death or earlier critical illness and disability income benefit (excluding anything spine or joint-related). I was 35 at the time, taking out a mortgage of 170,000 with Woolwich, was earning 45,000. I was single, full time employed, no children or dependants. I paid £86 a month and the broker received a good commission. I cancelled it a number of years later (can't recall how many) because I decided, after a bit of research, I didn't want it, that it probably wouldn't cover me if I needed it to (not sure how I came to this decision but at the time I decided it was a waste of money.

I haven't tried to claim back since because I was unsure whether this was mis-sold or not. It was explained to me and I guess I must have thought I needed it - eg to pay off my mortgage if I got cancer or something. Death benefit wasn't really necessary, in hindsight, because the flat would have been sold and my mum/brother would have got the profit but there was nobody I needed to look after as such. I have been wondering over the years, though, whether this was mis-sold and whether I should claim it back.

Thoughts welcome. Many thanks.

Kat

dunstonh

My mortgage broker sold me a Scottish Provident Self-Assurance policy in Sept 2004.

First thing to note there is that the date of sale is prior to regulation.

It was for death or earlier critical illness and disability income benefit (excluding anything spine or joint-related). I was 35 at the time, taking out a mortgage of 170,000 with Woolwich, was earning 45,000. I was single, full time employed, no children or dependants.

Normally, you would question the need for life assurance. However, as critical illness cover is on the policy, then the cost of adding the life cover is usually just pennies per month and common sense to add on a long term policy.

I have been wondering over the years, though, whether this was mis-sold and whether I should claim it back.

Nothing you have said suggests any mis-sale. Just a common sense recommendation.

addedvaluebob

Was the adviser an IFA or financial adviser, if so the 'date of regulation' is just a red herring that should be ignored.

Normally, you would question the need for life assurance. However, as critical illness cover is on the policy, then the cost of adding the life cover is usually just pennies per month and common sense to add on a long term policy

A fine example of actuarial and marketing sleight of hand. Tell the people who are selling the policies that the life cover is 'pennies per month' and this will dissuade people from complaining about this sort of sale. All products are fully costed but Scot Prov's marketing team and actuaries loaded the premium weightings so it looks like the critical illness is significantly more than the life cover. Whilst it is true that the chance of CI is higher than dying the cost of the life cover is not pennies.

Nearlyold

And there was me thinking the additional cost of the life cover when added to a CI policy was small because the cost of the risk of a death claim from one of the three main causes of premature death (excluding accidental death) Heart Attack, Stroke & Cancer would already covered by the CI section of the policy, turns out it was some sort of conspiracy all along.

addedvaluebob

No its not a conspiracy, it is effective marketing.

magpiecottage

addedvaluebob wrote: »

Was the adviser an IFA or financial adviser

The "FA" in "IFA" stands for "Financial Adviser". So this is a nonsense question because the question is thus "was he a financial adviser or was he a financial adviser?"

if so the 'date of regulation' is just a red herring that should be ignored

The part of the Financial Services and Markets Act 2000 which covers general insurance only came into force on 14 January 2005. So unless there was an investment element to the policy, it was not regulated when it was sold in 2004.

Scot Prov's marketing team and actuaries loaded the premium weightings so it looks like the critical illness is significantly more than the life cover. Whilst it is true that the chance of CI is higher than dying the cost of the life cover is not pennies.

Do you have evidence of this?

Lets stop and think about this a minute.

If we take out a critical illness policy, the insurance company has to take into consideration the risk of us getting one of those illnesses - all of which are life threatening. In fact they are the major killers - cancer, heart attack etc.

If we take out a life policy, the insurance company must take into consideration the fact that we might die from one of those illnesses - or that we might die from something completely different - stepping under a bus etc. Those different causes of death, although they occur, are thankfully, very rare.

So the cost of allowing for the risk of them happening is very small.

If you take out critical illness and add life cover, the insurance company must add the cost of you dying from one of those rare causes but it will not pay out on death from something like cancer because it would already have paid out when the cancer was diagnosed.

That is the main reason why the additional cost of a death benefit on a critical illness policy is much lower a stand alone life policy. (There is also a small administrative saving.)

And that is why Nearlyold has made a sarcastic comment which was apparently lost on addedvaluebob.

addedvaluebob

The part of the Financial Services and Markets Act 2000 which covers general insurance only came into force on 14 January 2005. So unless there was an investment element to the policy, it was not regulated when it was sold in 2004.

But if it was not sold solely by a 'mortgage broker' the rules for financial advice apply regarding TCF, etc and therefore the advisory company remains responsible for any advice. You are assuming that the OP took a policy without any advice

magpiecottage

addedvaluebob wrote: »

But if it was not sold solely by a 'mortgage broker' the rules for financial advice apply regarding TCF, etc and therefore the advisory company remains responsible for any advice.

TCF - for the benefit of other readers, is "Treating Customers Fairly" It was an initiative by the old Financial Services Authority from about 2006.

So what addedvaluebob is saying is that in 2004 (when this case relates to), a mortgage broker should have complied with a rule imposed by a regulator two years later, in relation to the sale of a product (general insurance) that it did not regulate until a year after the sale.

I am not saying that the adviser did not have a duty of care, simply that FOS has no jurisdiction and you cannot rely on the Financial Services and Markets Act 2000 to pursue a complaint.

kingstreet

Off-topic, but continuing the discussion about cost.

Male 30NB NS £100,000 decreasing term over 25 years;-

life & critical illness £16.28 per month

critical illness alone £16.12 per month.

Scottish Provident.

FWIW L&G charges the same premium, £15.82 for both, so no cost difference for adding life cover.

It's worth remembering, if you take stand-alone critical illness and die within the 28 day survival period needed, there would be no payout. Adding life cover free, or for a very small difference might result in a payout in those circumstances.

Following discussion, wanting to leave an unencumbered property to next of kin is adequate reasoning for life cover for someone single no dependents.

magpiecottage

Thank you kingstreet. I think this evidence demonstrates that the assertion by dunstonh was correct and the counter assertion by addedvaluebob was not - for precisely the reasons I have explained.

The OP was a little older than your example and the mortgage rather more but I would guess the extra cost was no more than about 25 pence a month. He does not know when he ditched it but even if it ran for ten years (until last September), it would only have cost £30 more.

It costs me over twice that just to fill the car up!

addedvaluebob

magpiecottage wrote: »

TCF - for the benefit of other readers, is "Treating Customers Fairly" It was an initiative by the old Financial Services Authority from about 2006.

So what addedvaluebob is saying is that in 2004 (when this case relates to), a mortgage broker should have complied with a rule imposed by a regulator two years later, in relation to the sale of a product (general insurance) that it did not regulate until a year after the sale.

I am not saying that the adviser did not have a duty of care, simply that FOS has no jurisdiction and you cannot rely on the Financial Services and Markets Act 2000 to pursue a complaint.

So you conveniently forget best advice and know your client as the forerunners of TCF and how this should have played out with any financial adviser before 2006. You know nothing about the details of the case but have stated that there is no case to answer because it was mortgage broker (you don't know if this is correct or not as the OP may not have stated the role correctly) but definitely would not be regulated for the sale of this product (you have no idea)

So what mgc is saying is that if you try and complain to a company he represents and do not specifically quote the right piece of legislation (I only used tcf as an example) you will use this to highlight why they are not eligible for compensation for any alleged mis-selling.

Please remember everybody, mgc represents the industry and companies you may complain against for financial services mis-selling.