Critical illness mis-selling? Discussion

Former_MSE_Sam_M

This is a forum discussion for Martin's request for your experiences with critical illness complaints you have made or are considering making.

This is the question and answer that prompted the discussion in full, as published in the 15 November 2016 MSE Money Tips email:

Q. Fifteen years ago when I got my mortgage, I was told that I had to have critical illness cover - even though I was a healthy non-smoking 41 year old. I’ve never claimed on this. Can I claim this back: is it PPI or not? Anne, by email

Martin's A: I wanted to answer this myself, as frankly I’m fishing to see how widespread an issue critical illness mis-selling may be.

While PPI only covers the cost of repaying your loans if you’re ill, critical illness means if you’re diagnosed with a severe condition specified on its list, it’ll give you a set lump sum pay out of tens or hundreds of thousands of pounds. The two are totally different policies.

Just because it's not PPI, though, doesn’t mean all critical illness policies are correctly sold. If your mortgage lender told you or implied “you have to get critical illness and it must be from us” that’s certainly out of order. But it is allowed to tell you “a condition of you getting this mortgage is that you have a critical illness policy in place – so we know you’ll be able to repay if you get ill”.

If you think you were mis-sold – because you were forced to get their policy (or their policy wasn’t suitable for you as you already had cover elsewhere) you can still complain. First you must formally complain to the company – use the Resolver tool for help to do this - then if rejected (as is likely) push on and, take them to the free financial ombudsman service.

If you think this has happened to you and you are taking a complaint forward, Martin would love to hear via this forum discussion. Please keep us in touch with how your complaint goes.

StokeD

I had exactly the same mis selling from Britainnia Building Society 9 years ago and would like some advice on how to pursue. I was 25 years old, and the branch mortgage advisor said I had to have critical illness cover and wouldn't be granted the mortgage without it. I paid £24 a month for 7 years until I started hearing about ppi and it was my understanding this was something similar. This was my first mortgage, I had been a teacher for a year at that time and had full protection on of sickness pay should I have been off. I would also argued that I was low risk due to my age and health. But in order for the mortgage to be granted, I had to have this from them. I looked back at paperwork and wrote off to them, they said it wasn't ppi as such and had not been mis sold. I then went through a claims company who sent them a letter and then returned the same back. I would definitely argue I paid this because it was a condition of the mortgage being allowed and in my view it was most certainly mis sold. Advice on how to pursue would be great. Thanks

-taff

Just because you'e young and healthy doesn't mean you can't get cancer or have a stroke.
If they made it a condition of your mortgage I assume you have paperwork that says this?
Full protection of sickness pay only lasts so long, and it's not guaranteed should you never recover or be unable to work due to illness.

tbutler12345

Just to say I was mis sold in 2006 when I bought my first house.

The mortgage advisor at my estate agent said I had to take life and critical illness out with them to get the mortgage I wanted.

I realised it wasn't appropriate to me as I had no dependants living alone, about 5 years later and complained. Ombudsman awarded the return of all my fees.

My first big money saving win. Thanks Martin.

Today married and on a decent income we've taken the decision to buy life cover and some income protection because its right for us. Back then they preyed on my naivity and just told me a quick and effective lie to bag their commission.

Nasqueron

tbutler12345 wrote: »

Just to say I was mis sold in 2006 when I bought my first house.

The mortgage advisor at my estate agent said I had to take life and critical illness out with them to get the mortgage I wanted.

I realised it wasn't appropriate to me as I had no dependants living alone, about 5 years later and complained. Ombudsman awarded the return of all my fees.

My first big money saving win. Thanks Martin.

Today married and on a decent income we've taken the decision to buy life cover and some income protection because its right for us. Back then they preyed on my naivity and just told me a quick and effective lie to bag their commission.

That's an interesting decision.

Did you pay the mortgage advisor for advice as well as taking the policies out through them? If you did I can see why they gave you a refund but it is perfectly acceptable for an advisor to give you free advice on the understanding that they sell you insurance cover to get commission to cover their costs - if you didn't pay them a fee, you have basically had a free service and cost the agent money

Nasqueron

StokeD wrote: »

I had exactly the same mis selling from Britainnia Building Society 9 years ago and would like some advice on how to pursue. I was 25 years old, and the branch mortgage advisor said I had to have critical illness cover and wouldn't be granted the mortgage without it. I paid £24 a month for 7 years until I started hearing about ppi and it was my understanding this was something similar. This was my first mortgage, I had been a teacher for a year at that time and had full protection on of sickness pay should I have been off. I would also argued that I was low risk due to my age and health. But in order for the mortgage to be granted, I had to have this from them. I looked back at paperwork and wrote off to them, they said it wasn't ppi as such and had not been mis sold. I then went through a claims company who sent them a letter and then returned the same back. I would definitely argue I paid this because it was a condition of the mortgage being allowed and in my view it was most certainly mis sold. Advice on how to pursue would be great. Thanks

A mortgage is typically 25 years long, even the best public service policies only pay 12 months full pay, many do 6 months / 6 half so how were you planning on keeping your home if you had a serious illness and were unable to work for 2 years? Only a year into a job it would be very lucky if you immediately got 12 months full pay.

Being young and healthy actually counts against you as it shows there were no reasons to avoid paying out (such as pre-existing conditions)

Naturally if you had CI and complained about being miss-sold PPI it would be rejected!

dunstonh

Martin's A: I wanted to answer this myself, as frankly I’m fishing to see how widespread an issue critical illness mis-selling may be.

Misselling successful complaints of CIC is virtually non-existent.

Just because it's not PPI, though, doesn’t mean all critical illness policies are correctly sold. If your mortgage lender told you or implied “you have to get critical illness and it must be from us” that’s certainly out of order. But it is allowed to tell you “a condition of you getting this mortgage is that you have a critical illness policy in place – so we know you’ll be able to repay if you get ill”.

If you were lied to in order to sell you a product, regardless of product, then it is wrong. However, it is the weakest of all mis-sale complaints because there is unlikely to be any evidence to support that. In this case, the whole sale is looked at for suitability and it is usually very difficult to persuade an ombudsman or complaints handler that it is unsuitable when covering a mortgage.

It should also be noted that mortgage brokers often require the purchase of an insurance policy to enable them to give free mortgage advice. That model is allowed as long as the insurance is suitable. So, whilst the lender may not need it, the broker may have it as a condition themselves. Martin appears to be talking about banks and not mortgage brokers/mortgage advisers. Please do not mix these up. I would be awful for small local firms to suffer the costs of complaints because of an article on MSE. I have had a mortgage broker in tears because of a fake complaint before. It cost him £500 for doing nothing wrong and most mortgage brokers don't earn much. Unlike the banks, these guys are personally responsible and it costs them. If you have a genuine complaint, then its fine. However, putting in a complaint that is aimed at a bank and doesnt apply to the broker is unfair.

dunstonh

I realised it wasn't appropriate to me as I had no dependants living alone, about 5 years later and complained. Ombudsman awarded the return of all my fees.

I suspect the reason in your case was the life assurance. You didnt need it. The adviser should have costed life with CIC included vs CIC only and been able to show the cost difference.

The ombudsman normally rejects complaints on the basis you mention which suggests the costing comparison wasnt done or wasnt available or made a mistake. Or perhaps you didnt have CI cover but had TI (lots of consumers mix up CI and TI cover).

macca1974

This is pretty bizarre as far as a campaign goes. I would have thought that Critical Illness Cover is one of the good guys? Just having a quick look at one companies claims stats (L&G because they were the first one to come up on google), 91.5% of claims paid, average age of claimants 46 (which implies lots of people below that age), average payout £65K, main reasons for claims, Cancer, Heart Attack, Stroke, MS and Total Permanent Disability. So lots of the people claiming are young and would probably have been able to go back to work (although their ability to do the job would potentially be impacted), wouldn't it be nice in this situation to have the mortgage paid off?

I'm not involved in financial advice and haven't been for years so don't know the exact "point of sale regulations" that apply any more, but unless its for cancelling an existing policy and then starting a new one that isn't as good, I'd be hard pressed to think of any reason why it would be inappropriate to have a critical illness policy that covered all or some of your mortgage. Regardless of age / health etc

-taff

I owned my last place by myself and had CI with LI to cover it. Techincally, I didn't need the LI because I have no dependants but i chose to take it because if I did become incapacitated, it would have paid my mortgage. I was also not upset that if I did die, it would pass on my family.
I could complain about it and say I didn't need it, but that would be a lie, I took it because I didn't want something to happen to me that meant I would end up homeless.
By the way, I had a fairly good pay rate and excellent sickeness and private health benefits.

RL11

For goodness sake, lets not promote a new Critical Illness Insurance mis-selling "scandal"!! Anyone can fall ill at any time and could claim on this whether they felt they needed it or not. Unless they had a pre-existing condition that meant they were paying for something that they could never claim for, critical illness cover is a valid thing to have. Just because you don't fall critically ill while paying for the policy doesn't mean it's been mis-sold. I'm a great driver and haven't claimed on my car insurance for 30 years - was that mis-sold?

The PPI side of things has been worthwhile in making everyone more aware, so mis-selling insurance isn't going happen to the same degree. Lessons have been learnt. The idea now is not to try and come up with more things that can be claimed against. As long as these kind of claims continue, all it does is to line the pockets of overpaid solicitors who do nothing other than come up with the right wording and the right address to send the claim to. More importantly, how do companies pay the claims? - our insurance costs go up!

Please let it lie!