CI & LIfe Insurance review - Premium hike !

future_252

I wonder if anyone else has had this same problem? I have had a Whole of LIfe Critical Illness plan with LIfe Cover from Scottish Provident which I have been paying into for 20 years. It started back then with £50k of cover for £30 per month. It was Index linked and has increased in cover & premium annually since then and currently stands at £198,363.00 of cover for £141.06 per month. This year the annual review has come through with a horrendous premium hike which I now cannot afford and I wonder if anyone has experienced the same. If so, is it worth complaining to get anything changed. I feel that the offer they have made is highly unreasonable. The options they gave me are as follows:- A) Sum assured increases to £202k (indexation), premium increases to £257pm. Sum assured remains at £198k, premium increases to £248pm. C) Sum assured reduces to £144k, premium remains at £141pm. D) Sum assured remains at £198k, premium remains at £141k but with option D the plan only provides cover till fund value has been exhausted which would basically be about a year then it would lapse with no value. I'm at a total loss here what to do. I'm angry at having paid so much into this plan for 20 years and to keep it going I'd have to find the extra £110 per month. My only option is really C), to keep premium the same and take a hit by reducing my cover by £60k which I feel is grossly unfair. Any thoughts??????

dunstonh

This year the annual review has come through with a horrendous premium hike which I now cannot afford and I wonder if anyone has experienced the same.

With plans with reviewable premiums, this is not uncommon.

If so, is it worth complaining to get anything changed.

What would you be complaining about?

I feel that the offer they have made is highly unreasonable.

It is not an offer. it is a choice. There is also another choice to include and that is to see if a modern plan with guaranteed premiums offers better value.

. I'm angry at having paid so much into this plan for 20 years and to keep it going I'd have to find the extra £110 per month. My only option is really C), to keep premium the same and take a hit by reducing my cover by £60k which I feel is grossly unfair. Any thoughts??????

This type of plan is obsolete. It was almost obsolete when you bought it. It is difficult to complain that it is unfair when the plan is doing exactly what the terms allow.

future_252

Hi Dunstonh, thanks for your reply. My main complaint is the huge hike in premium. Every year this has been just a few pounds of an increase, this is the first time that it has almost doubled.....how can they justify such a huge increase in one go? I have consulted an IFA and got premiums from them for replacement products, but I'd be no better off with those. Maybe the terms of this plan do allow for this, however, shouldn't they be fair and reasonable? It appears to me that they are doing this in the hope that I (and probably many others like me) simply cancel their plans so that they can keep the small fortune that has already been paid to them and they won't ever have to pay out!!!

dunstonh

My main complaint is the huge hike in premium. Every year this has been just a few pounds of an increase, this is the first time that it has almost doubled.....how can they justify such a huge increase in one go?

The problem with this type of plan is that is how it works. The premiums are reviewed based on a range of factors, including age. Age can be a big influence as you tend to find that pricing falls off a cliff when you hit certain ages. So, you get minor changes and then all of a sudden a big change as you hit a certain age. Another thing is the investment returns and the assumptions. The FCA have been lowering the assumptions and investment returns in general are much lower than 20 years ago. This is almost certainly where the bulk of the issues are.

Maybe the terms of this plan do allow for this, however, shouldn't they be fair and reasonable?

They will allow for it as what you describe is normal for an investment linked plan. As investment returns are unknown in advance, they have no way to guarantee anything unless you buy a plan with guaranteed premiums. If you buy a plan with reviewable premiums then this is what can happen.

It appears to me that they are doing this in the hope that I (and probably many others like me) simply cancel their plans so that they can keep the small fortune that has already been paid to them and they won't ever have to pay out!!!

No. That is not how it works. They have already costed the claims rate into the plan and that is built into their profit and loss expectations already. So, people paying premiums is what they want. Not people cancelling.

The main problem is that it was a product that was built and priced in the days of high inflation, boom/bust economy and higher investment returns (ignoring inflation). It doesnt work well in an economy that is relatively stable, low inflation and with low investment returns (ignoring inflation).

This trend will continue. It won't get any better. So, a guaranteed premium plan may not make you are better off but it may prevent future increases. You may not have the same financial needs now too. Your pensions will be higher (so death benefits from those better than 20 years ago). You may have savings/investments and your life assurance needs may be lower. So, it may be a trigger to look at all again.

future_252

Okay, I see what you're saying and it does make sense. When I spoke to my IFA (not the one I took the plan out with), she just asked "Why do you want this cover in the first place". My ex and I both took out identical plans 20 years ago. His one paid out 6 years ago as he had kidney failure and he got £168k as soon as he went on the transplant register. He got a transplant after 2 years on the list and is still going strong, but I presume money all spent!! With the high rates of cancer etc etc I feel that CI cover is a bit of a cushion for me, if I did get ill and couldn't work then I've no idea how I would cope. I already have a joint life ins with my new other half that covers our current mortgage so that would be taken care of. Don't pay much into any pensions, maybe I would be better off cancelling this one and putting my £140 into my pension (I'm 51, and don't really want to work up to lunchtime on the day of my funeral!!)

magpiecottage

I recently looked at a complaint about a similar policy (with another insurer).

The indexation will increase the premium year on year (normally the premium goes up proportionately faster than the cover because each increase is applied on the rates applicable at the time).

The difficulty you have with a 20 year policy is that there was probably a fairly large increase at 10 and/or 15 years. This will allow the original adviser to timebar a complaint.

The insuirance company will argue that it is simply a matter of commercial judgement on its part and FOS should not intervene.

suem4075

Hi
I have something very similar, I took out a CI & L cover insurance over 20 years ago to pay out £50,000 if ever needed. My premiums started at £29.50 with a gradual increase each year for 5 years until we reached £43.50 which I have been paying for over 15 years. My last review letter was in 2011 saying everything was good and nothing needed to be done. I have received a letter yesterday saying to pay out the said amount my contributions needed to increase to £122.50 per month. If I decide not to increase my premiums the pay out would now be 25% of the original value so £12,500. My mortgage has another 8 years to run so is it worth doing nothing or cancelling, I am definitely not increasing my contributions! Have I got a case to complain?

dunstonh

suem4075 wrote: »

Hi
I have something very similar, I took out a CI & L cover insurance over 20 years ago to pay out £50,000 if ever needed. My premiums started at £29.50 with a gradual increase each year for 5 years until we reached £43.50 which I have been paying for over 15 years. My last review letter was in 2011 saying everything was good and nothing needed to be done. I have received a letter yesterday saying to pay out the said amount my contributions needed to increase to £122.50 per month. If I decide not to increase my premiums the pay out would now be 25% of the original value so £12,500. My mortgage has another 8 years to run so is it worth doing nothing or cancelling, I am definitely not increasing my contributions! Have I got a case to complain?

What exactly would your complaint be?

They are acting within the terms of the policy which you agreed to. You did not buy a guaranteed premium plan but a reviewable one.

Have you looked at a modern guaranteed premium term assurance to see how that prices compared to this old fashioned plan?

suem4075

I suppose my main complaint would be why wasn't I told sooner that this policy was performing so badly as now the contributions have nearly trebled!

dunstonh

suem4075 wrote: »

I suppose my main complaint would be why wasn't I told sooner that this policy was performing so badly as now the contributions have nearly trebled!

It is not the job of the provider to tell you about performance. It is the job of your adviser (if you employ one) or yourself to check on that. The provider is required to tell you the premium required. You then decide what to do or seek advice on what to do.
If your plan had a 15 year review point and then every 5 years after then you would not hear a thing for 15 years and then not again until every 5 years after and it would be a factual communication. i.e. to get this amount of cover you need to pay this amount of premium. No opinion. No advice. That is not the job of the insurer.

So, did you at any time employ an adviser to provide you advice and opinion on the product you hold?

The product itself may not actually be performing badly. It is more likely that it just reflects the case that we are no longer in a frequent boom/bust, high inflation economy and you have a product that is built on assumptions that match that and not a low inflation, lower returns economy. Also, the assumptions used today for future projections are much lower. These assumptions are controlled largely by the regulator (they give some scope but the regulator has caps and the caps are low).

suem4075

We did use a financial advisor those years ago, we told him how much we needed to pay the mortgage off if anything happened to myself or husband. He sold us this policy never telling us it was unit linked but we would get a guaranteed lump sum if anything happened. The advisor has since move away with no contact, obviously we were very young & trusting and believed what he said!
I have managed to find the original proposal & documents and the £50,000 doesn't say guaranteed, just insured, I now feel totally gutted that we were sold a policy which this could happen!