Legal position following insurer error

jukeboxs

I am writing with respect to an insurance savings policy (a single premium with-profits bond - original premium £25k, with subsequent bonus and demutualisation windfalls added), which I took out in 1996. The insurer demutualised around year 2000, and was taken over by several companies since then. I surrendered this policy in 2002 (I received a payment of c£40k). I thought I had surrendered it in full, but I continued to receive statements from the insurer thereafter, so I assumed it had only been surrendered in part. Indeed, I wrote to the insurer at that time several times stating that I thought the policy had been surrendered, and could they confirm that the policy was in fact still in force. They replied to say that yes it was still in-force. I still have these replies.

A few years later, I started a 7.5% annual withdrawal from this policy, which we found useful to cover summer holiday costs. This has continued for the past 10 years.

I phoned the insurer last week, as my annual withdrawal was overdue. They phoned me yesterday to advise that they had made a mistake in 2002 and that the policy was indeed surrendered in full in 2002, and that I owe them for the subsequent £18k of annual withdrawals from the policy. To say this is a shock is an understatement!

I have made a formal complaint, which will be investigated by the insurer internally. If the outcome is not satisfactory, then I can take this to the Ombudsman.

I have always assumed that the insurer had made a mistake when surrendering my policy originally, and that they had only surrendered part of the policy, which is why I checked several times in writing that the policy was still in-force. So, my subsequent withdrawals were based on this assumption.

Any thoughts on my legal position in this matter, given the mistakes made by the insurer, and the length of time that has passed since? I will seek legal advice next week, but I thought getting some opinion now (as I am worried about this) might help me sleep this weekend.

Thank you for your time and advice.

bigadaj

Given the information you've supplied then the insurer appears to be at fault for an error but the question is what is the correct redress. . I'd certainly co,plain through regulators and see what the company will offer to settle the matter.

It's often useful in these situations to switch the issue around to see what might be considered fair. So what would you expect if you hadn't cashed in and received no income to subsequently find out this fact not to receive the income that hadnt been paid. What I'm saying is that I can't see a scenario where the whole amount they have paid you is written off by them, so it's very much a case to see how much they are prepared to forego or provide compensation, and work out how the remainder can be paid back.

Well worth speaking to a lawyer for their free half hour, but I'm always vary of any advice given by someone who may then benefit with little liability, speaking as an engineering consultant!

colsten

jukeboxs wrote: »

I thought I had surrendered it in full

<snip>

I have always assumed that the insurer had made a mistake when surrendering my policy originally, and that they had only surrendered part of the policy

You are contradicting yourself in your short post. Not a great position from which to make a complex complaint.

tell_it_how_it_is

I can't offer any sound advice, but it would be interesting to know how this pans out.

The only thing I'd say against you is that having realised it was most probably a glaring error by the insurer, you would have made some kind of provision for the possibility of this coming back to bite you on the bum, and perhaps held some of the monies back each year for exactly this scenario.

My sense of fair play would suggest you should pay a percentage of it back, but in reality who knows?

PeacefulWaters

While not defending the insurer's incompetence and stupidity, your post suggests you knew exactly what was happening.

Which is pretty close to theft.

atush

I dont get the feel of that at all, not sure what others are reading into this.

They thought they had surrendered in full, but upon checking (more than once it seems) that they were told it hadnt been surrendered in full. which I assume is why they checked? Several times? Too be sure? I am not an accountant, nor am I an actuary. But if i asked either to check something several times I would assume they were correct and I was not.

So later they took annual amounts from what they assumed was left of the policy.

I agree they should not expect it to be written off in total, but I do think they did not intentionally steal the money.

Those of you saying so should perhaps re read?

dunstonh

Any thoughts on my legal position in this matter, given the mistakes made by the insurer, and the length of time that has passed since? I will seek legal advice next week, but I thought getting some opinion now (as I am worried about this) might help me sleep this weekend.

I had a similar case many years back with a client. He had years of pension statements showing the values going up. He thought something was wrong with the values and checked multiple times but was always told it was correct.

On the basis of that information he retired and moved out of London only then to be told that the figures were wrong. It turned out that he had taken part of the pension many years earlier and they forgot to record that against the policy.

He complained, they rejected. he took it to the FOS but the FOS stated that he had no legal entitlement to benefit from the mistake. Al;though they did award a £250 goodwill payment.

The position is that a mistake doesnt give you an entitlement to keep money that is not legally yours unless you have reasonable expectation. A phone call to check the figures are correct is not necessarily reasonable expectation as that could be part of the error. You yourself have confirmed you doubted the figures. So, it is difficult for you to claim reasonable expectation.

What would normally happen in cases like this is that they pay you a goodwill figure of a few hundred and you pay them back the money. Although you are allowed to pay it back over a period that is similar to the length of the error. So, if you took 10 years worth of regular withdrawals then you can take 10 years to repay it.

jamesd

There is are two critical questions that can largely decide the outcome of this case:

Did you spend more money on the summer holiday that you would have done otherwise, or subsequently spend the money rather than keeping it, so that your position changed due to you spending what you believed was your money?

Do you have so much money that it makes no difference to you whether you repay it or not?

You repeatedly told the insurer in writing that you wondered whether their statements were right and they repeatedly reassured you that they were right. You had every reason to take them at their word and honestly believe that they were right, had only done a partial redemption, and that the money was yours. The more specific your letters were in telling them about the redemption request the stronger your position, since that would have told them why you thought that there might have been a problem and you should be able to rely on them checking that specific possible cause and giving you a correct answer. Annual statements would weaken your position because they might have shown you that there was no removal of value from the policy, via the lack f a change in value.

If you have received payments that you have not yet spent you should offer to return that money.

There is some related discussion of the principles on the wrong account payment page in the final "a complaint by the person who had money mistakenly put into their account" section.

Your own financial position will also matter. If you have so much money that you can easily repay you're more likely to have to repay than if you're on means tested benefits with limited to no ability to repay in any reasonable timeframe. If this is the case, you may want to propose to them that instead of eventually taking this to the FOS if there is disagreement, they recognise that you diligently told them where you thought there might have been a mistake but were told there was none, that your position changed because of the extra income that you honestly believed was yours and that you propose that they accept repayment of the most recent 50% of the payments over a timescale that is easily affordable to you.

If you want further guidance on this you can phone the Financial Ombudsman Service. Much cheaper than a solicitor and what the FOS ultimately rules is binding on the insurance company, but not you, so if necessary you can go legal after the FOS decision. Meanwhile, you have the money so can sit smiling while it gets sorted out.

Random47

I have a tendency to agree with colsten & PeacefulWater . You knew exactly that the insurer were wrong and you just thought great I've got a few letters from them confirming their stance that you were still invested. You then chose to ride this mistake to your financial benefit.
But lets look at figures.
They now want back 18K based over last 10yrs payments = £1800yr or roughly speaking 7.5% of principle 25K each year.
That would mean when they made mistake they wrongly assessed that you still had the equivalent of the 25Kprinciple sum invested
NOTEABLY
This would have meant you made £40K interest over 6yrs from 1996-2002. Returns are rarely that stratospheric. I think this was glaringly obvious to you at the time back in 2002.



Whilst its their administrative error you were complicit by then taking the money after you had told them you didn't think you were still invested. Not once but TEN times.

Sorry but little sympathy from me. Hope you have some nice holiday photographs because I think you will likely be liable to pay at least a proportion of this money back.

antrobus

jamesd wrote: »

There is are two critical questions that can largely decide the outcome of this case:

Did you spend more money on the summer holiday that you would have done otherwise, or subsequently spend the money rather than keeping it, so that your position changed due to you spending what you believed was your money?

....

I believe that lawyers refer to this as promissory estoppel.

jamesd

Random47, a normal consumer would not normally be expected to do investment return estimates to try to project possible values of an insurance policy. Annual statements would have given some idea, if they had values. If those showed no sign of a reduction then that would be a strongly negative aspect to the complaint.

If all of the £40k was just investment returns the growth to get to 40k was only 8.1% a year, but some of it was for payments due to takeovers. Ample reason to expect more than that over that time period, depending on investment expectations.