Life insurance - clawback and cancelled contract

dylanlawton

Hi,


I'm in a position where I've inadvertently cancelled my life insurance policy and wasn't aware that I'd signed a contract.


Mortgage Advice Bureau are now attempting to claim a claw back value (six hundred odd pounds) from me as a result. When I read the contract is only states that I need to pay the outstanding commission and there's no reference to claw back. At the time we cancelled there was no outstanding commission as it looks to have between paid in a lump sum. I'd also argue that it was never explained to me and would much rather have paid the consultancy (£95) than sign a waiver agreement. They won't divulge the actual commission structure but I've spoken to L&G and they've told me it was a lump sum.


The solicitors letter arrived this morning, it's inaccurate like all the other letters and don't think they'll take it all the way but they might! The solicitors letter also differs to the original claim, this is asking me for 1% of the value of the mortgage but this matches the value that MAB are asking for in terms of claw back, coincidentally.


There have been so many inaccuracies and contradictions that it's embarrassing but they are persevering and need some help! Will happily pay for decent advice but don't know where to start.


Any help appreciated.


Dylan.

ACG

The amount of commission paid will likely be on the quote you received/should have - towards the back.

Difficult to say how much you would probably have to pay back as it varies from insurer (some divide it by 24 or 48 months and split ti equally, others clawback more more proportionally in the first 12-24 months than the second 12-24 months).

could you put the policy back in force until the end of the clawback period? Would that work for you?

A lot of brokers do this, I have known some prepared to take it all the way but the clients normally back down. Likewise I have known brokers to huff and puff but then give up.

Its not something I agree with personally, I think anyone should be withint their rights to cancel if they wish but I suppose my opinion is not going to help you out here.

You could try and argue it on:
1) Innacuarices/a technicality,
2) not being told - do they have any paperwork signed by you?
3) Its an unfair contract - a contract I believe has to have a benefit for both sides, im not sure where the benefit lies for you in this.

If there is no paperwork signed by you then I cant see how they can enforce it. If there is then I cant see how you can argue it to the point of expecting to win. So you would have to see if they back down or not.

dylanlawton

Cheers ACG - there is no breakdown and they won't tell me what it was! They claim they don't have to. I definitely signed but the wording that I want to concentrate on, at the time I'm 99% certain there was no outstanding commission...this was over a year ago now so no way of resurrecting it. I may end up paying but will do everything I can not to. I'm sure they're well versed in these situations...

dunstonh

It all comes down to the paperwork.

I know a local mortgage adviser that told me a month ago that he took someone to court and the judge ruled in his favour.

It is not unfair to have a clawback clause in the terms of business. However, the clawback will be relatively pro-rata for time gone. So, you should only be billed on the difference.

Quentin

dylanlawton wrote: »

Cheers ACG - there is no breakdown and they won't tell me what it was! They claim they don't have to. I definitely signed but the wording that I want to concentrate on, at the time I'm 99% certain there was no outstanding commission...this was over a year ago now so no way of resurrecting it. I may end up paying but will do everything I can not to. I'm sure they're well versed in these situations...

When you say that you have no way to resurrect, what do you mean?

Do you have a copy of the contract?

If so that should show exactly what you agreed.

If not ask for one and take it from there.

addedvaluebob

dylanlawton wrote: »

Hi,

Mortgage Advice Bureau are now attempting to claim a claw back value (six hundred odd pounds) from me as a result. When I read the contract is only states that I need to pay the outstanding commission and there's no reference to claw back. At the time we cancelled there was no outstanding commission as it looks to have between paid in a lump sum. I'd also argue that it was never explained to me and would much rather have paid the consultancy (£95) than sign a waiver agreement. They won't divulge the actual commission structure but I've spoken to L&G and they've told me it was a lump sum. Dylan.

Dylan

The clawback they are referring to is the payment they have received from L & G. They will have received a lump sum up front (which is why you think there is nothing outstanding) but this will be conditional on you maintaining the monthly premiums for an initial period. Typically 48 months but this can vary depending on the length of your policy.

If they have sold a policy alongside the mortgage then you should have received a full breakdown of their commission within the paperwork and this should have been specifically disclosed and compared with the £95 fee to allow you to make a decision from a position of informed choice. Without this information you may have been misled particularly if they wont tell you what the commission was and are telling you they don't need to this implies that you were not informed in the first place.

If you cancelled the policy over a year ago, how long had you been paying the premiums for?

dylanlawton

Thanks all.


Here's the line in the contract I signed that is crucial


"If, for whatever reason, the life policy or protection insurance does not come into effect or 38 months of premiums are not paid by the client, then the outstanding commission amount lost by MAB in respect of the life policy or protection insurance will be payable by the client. The amount will be payable within 30 days of the Arranger's notification to the client. If the amount is not paid within 30 days of notification then the arrangers standard fee of 1% of the mortgage amount will be payable"


So, we paid for about 30 months and then got a new policy (if I'd known I would obviously have left it until 38 months). Quentin, when I say I can't resurrect the policy I mean that I was never given a chance to cancel the new one and bring the old one back during the grace period of the new policy.


I have definitely never received a breakdown of commission and they have stipulated over email that they don't have to provide this information. When we signed it wasn't a discussion of options it was a "sign this please" scenario but very difficult to prove I guess.


This has been going on for over a year, MAB are saying the that they want the claw back sum but the solicitors are stating that this £600 is 1% of the mortgage - this isn't accurate and my argument with MAB was that I'm not liable for claw back, just outstanding commission.


Interestingly, when I received the first letter the date stamp on the envelope was a month later than the date on the letter (I kept it all just in case) which makes me think that they don't want to go down the commission route and added the month delay on purpose. The solicitors are now not mentioning commission, they're mentioning the 1% value of the mortgage.


Horrible situation to be in as I'm confident that they've done enough wrong and are inaccurate but have never brushed shoulders in the legal world and really don't want to.


Cheers.

dylanlawton

It's a waiver fee arrangement agreement that I signed by the way, in case that wasn't clear.

dylanlawton

Quote from an email received from MAB "[FONT=Calibri,sans-serif]It is FCA guidelines that the advisor does not have to outline to you the commission amount paid to them."[/FONT]

dunstonh

this isn't accurate and my argument with MAB was that I'm not liable for claw back, just outstanding commission.

You are liable for the clawback. As mentioned higher up by addedvaluebob, the commission is paid up front but only on the proviso that you continue to pay premiums for a defined period. The insurer claws back some of that commission (based on time in force) if you cancel the policy.

So, if the commission was say £1500, that becomes your effective fee. If the clawback is £700 then you are still liable for that £700 as the MAB have only received £800.

If there is no agreement in place to cover clawbacks then a court will not enforce it. However, if there is an agreement, then you would expect a court to enforce it.

It is normal for the amount of commission to be disclosed on the quote issued by the provider. Both at point of sale (by MAB) and again by the provider in the post when they confirm it as accepted. There is no logical reason for MAB not to disclose the commission amount or the amount of the clawback as they would be required to do that anyway if they pursue this. However, they do not need to justify it

Quentin

dylanlawton wrote: »

......Horrible situation to be in as I'm confident that they've done enough wrong and are inaccurate but have never brushed shoulders in the legal world and really don't want to.

They will have to give all the detail of the debt to win any court case over this.

You say you are confident they are inaccurate in their demand so you are safe to reply denying you owe the amount requested and ask for it to be itemised. Then take it from their reply