Life Assurance

christopher_phillips

I am 75 years old and my wife is 69 years old, we both retired in 2011 and no longer have a mortgage.
In 1992 we took out a Joint Prime Life assurance policy with Commercial Union/Norwich Union/Aviva through Barclays Insurance Services Company Limited, The benefits being a guaranteed sum of £16,000 and a promise that if one of the lives assured dies, they will pay the guaranteed sum assured or the cash value of the units allocated to the policy, whichever is higher.
We recently requested from Aviva the death value and the surrender value and have received a communication stating that the death value is £7,125.00 and the surrender value is £6486.65. We complained to Aviva that they were not sticking to their promise of a guaranteed amount of £16,000 on the first death and they say that we should take the matter up with Barclays and that they have forwarded our letter of complaint to them.
Barclays have contacted us and are investigating our complaint but we are not optimistic and wonder if anyone else has experienced a similar problem.

dunstonh

Was the guaranteed sum assured only guaranteed it you maintained the premium for that level. Including through future review points where you would have been given the option to either increase the premium or lower the sum assured?

christopher_phillips

Thank you for your response
We received a Policy review in 2007 stating "having reviewed your plan, we have found that your current level of life cover exceeds the maximum we can provide until the next review. a reduction in the level of life cover provided by your plan will therefore be necessary. The maximum amount of life cover that we are able to guarantee you until the next review is £7,125.00 and your sum assured will be reduced to this figure on 13 May 2007.Accordingly, the the extra premium part of your monthly premium of £36.10 is reducing in line with the reduction in the sum assured. Therefore, the new premium payable from 13 May 2007 is 31.49 per month."

When we proceeded with this policy, at no time were we told that the guaranteed sum of £16000.00 would be reduced and we naively believed that regardless of the reviews, that would be the case.

dunstonh

When we proceeded with this policy, at no time were we told that the guaranteed sum of £16000.00 would be reduced and we naively believed that regardless of the reviews, that would be the case.

The sum assured is guaranteed, providing you pay the premiums to maintain it. If you don't then reducing the sum assured is another option. It looks like you selected that option rather than pay the increased premium.

In respect of the plan and the guaranteed sum assured, there is nothing wrong here. The plan is doing what it was always intended to do (albeit being built in the days of boom/bust and high inflation and AIDS and priced accordingly). These reviews typically happen every 5 years after an initial point (usually year 10 or 15)

Your only hope on this is if Barclays identify a failure in the sales process. It happens. But you are right not to be optimistic.

christopher_phillips

Thank you so much for your observations, we live in hope that Barclays will take notice of our argument that we were not made aware of the possible changes to the policy and will report the outcome to this forum for the benefit of others who might have suffered the same experience.

kingstreet

Old flexible unit-linked whole life products were available on three bases;-

maximum cover (short-term highest death benefit and lowest premium required highest investment returns to be sustainable)

balanced cover (designed to give same cover for same "medium" premium for life using medium growth expectation)

lifetime cover (zero/minimal growth assumed to keep cover and higher starting premium the same).

The idea which underpinned them was that each premium would be invested in units in a chosen unit linked fund and growth in the value of units would help to contribute to the increased cost of cover later in life. Units were encashed each month to pay for cover.

These were based on the investment returns and interest rates of the 1980s.

Many people were sold maximum cover (premium and cover guaranteed at those levels for as few as five or ten years) as something which would stay the same for ever as investment returns would always be high.

As that was not the case beyond 1987, the plan reviews meant higher premiums or reduced cover or sometimes both.

These days, we would meet the client's protection needs with a term assurance and savings needs with an ISA as life-assurance based savings has been proven to give poor tax efficiency and involve high charges since the abolition of LAPR in 1984 and onwards.

kanha

:(I have just joined MSE forums and note that I have a similar situation to Christopher, whereby I took out a "Prime Life Whole Life Assurance" policy in with a Guaranteed life cover of £100,000.
I am now looking at my investments and policies (getting close to retirement). The Guaranteed life cover of £100,000 has been reduced twice first to £87,238 and in then to £57,552. I have always paid premiums by Direct Debit. Never had the time to look at these closely or follow up but as I am now working part time, I am scrutinizing all policies / investments.
No mention was made when the policy was sold to me by the representative or the company that this would happen. I am almost convinced reading through the above that the Life Assurance company have this covered somewhere in their small print but did not see fit to highlight this at the time.

dunstonh

No mention was made when the policy was sold to me by the representative or the company that this would happen. I am almost convinced reading through the above that the Life Assurance company have this covered somewhere in their small print but did not see fit to highlight this at the time.

Until the early 2000s, it had never happened. So, if yours is an old one (and it probably is as these went mostly obsolete by mid 90s) the thought of it falling short was probably not considered a key talking point. However, if would have been a risk warning since the late 80s which are given higher prominence