Mis-sold Income Protection Insurance

ahep2007

Hello All,

I hope that I am posting in the correct forum as I need some advice/opinions on my current situation.

I took out an Income Protection Insurance policy through an FCA regulated broker (leaving the name of the broker out at this stage) with whom I went through a lengthy interview with to find the protection that best suited my needs.

To summarise, I am a self-employed contract worker and hold several contracts. I was looking for a policy that would cover me in the event that I lost one of my contracts as each one is worth roughy £1,500 - £1,600 per month. On the advice of the broker, I took out a policy with a well-known and reputable company as I was told that it fitted my requirements exactly. It is important to note that I wanted to be covered in the event of losing one of my contracts, as it would be unlikely and most unfortunate if I were to lose all of them at the same time. All of this was noted by the broker on their system and also in writing to me on the Demands and Needs letter that I was sent both via post and email. The broker even checked (purportedly) with someone to ensure that this would be the case.

Unfortunately, this week I was informed that due to financial constraints, one of my contracts would be terminated at the end of next week. When I called the insurance company to make a claim, I was told that I would be unable to proceed as they only cover for complete unemployment, rather than the loss of/reduction of income. in order for them to pay out, I would have to cease trading entirely, which is obviously not an option. This is in complete contradiction to how the policy was sold to me and leaves me in a position where I am losing around £1,500 per month when I was under the impression that the policy I had taken out and have been paying for would cover me for this amount for up to 12 months.

The broker has accepted liability and to their credit, have been extremely apologetic and at this stage are not trying to wriggle out of the fact that the information I was given was completely incorrect. Thankfully, all of the conversations I had with their representative have been well documented in addition to the calls having been recorded.

This however still leaves me in a position where I am unable to claim on the policy. I would expect the broker to be compensating me for the amount that I was expecting to receive, owing to their bad/incorrect advice and mis-selling of the policy, in addition to a refund of all premiums paid up until this point. How realistic is this? I am panicking slightly as it is a big chunk of my income that is disappearing. After all, the reason for taking out this type of insurance is to allow for bills and other financial commitments to be unaffected; it seems unfair and wrong that I should be in a position where I am unable to do this owing to someone else's incompetence.

Any experience of this would be greatly appreciated.

[Deleted User]

ahep2007 wrote: »

I would expect the broker to be compensating me for the amount that I was expecting to receive, owing to their bad/incorrect advice and mis-selling of the policy, in addition to a refund of all premiums paid up until this point. How realistic is this?

That would obviously be massively unrealistic.

It would give you both the cover that you wanted, and a refund of the premiums. In other words, an enhanced policy from the one you paid for, but free of charge.

You ideal situation would have been to have paid the premiums and have the cover you wanted.

As you have paid the premium but not received the cover, a refund of the premiums would be in order.

ahep2007

So they have mis-sold me a policy that was supposed to offer me financial security in this exact situation, leaving me £1,500 out of pocket per month. Seems very, very wrong to me.

dunstonh

I would expect the broker to be compensating me for the amount that I was expecting to receive, owing to their bad/incorrect advice and mis-selling of the policy, in addition to a refund of all premiums paid up until this point. How realistic is this?

Not at all realistic, I'm afraid. Standard in this scenario is a refund of premiums plus interest.

I don't know if there is such a thing as protecting individual contracts. Its not something that is within my remit. its more a commercial lines broker area. However, what you describe certainly doesnt match.

[Deleted User]

So do you now understand why you cannot have the policy benefits but also insist that you don't pay for it?

It needs to be one or the other and a refund of the premiums is the likely outcome.

ahep2007

I get that; I would rather have the policy benefits as that is what I was expecting. It strikes me as wrong that they should be allowed to get away with simply refunding the premiums paid and send me on my way. The premiums paid thus far would not even equal one monthly payment of the benefit, leaving me in a very precarious financial position until I am able to replace this income.

dunstonh

If you buy something that doesnt do as advertised you get a refund.

It should also be noted that its not an income protection either. Its a PPi policy you have.

stator

No-body here knows for sure what the broker will settle for.
If you ask for a settlement that is the equivalent of 6 months of the policy paying out, they might agree.
Your case may be that if they had done their job properly, you would have taken a different policy somewhere else, but since such a product probably isn't available, this wouldn't be a strong claim.
You might say that if you had known there was no policy that could have protected you, you would arranged your financial affairs differently and wouldn't be in such a precarious position now. That's a fair argument and might get you somewhere.
But you have to find out what the ombudsmen is likely to award you.
There are lots of case examples available on the internet, I think, but none will match your situation exactly.

So go ahead and ask for a settlement. Just don't expect all your premiums back and a payout of the claim, because it is unreasonable.
If you find more work, the insurance would have stopped paying out, so no-one knows how much you have lost out by this mistake yet.

unforeseen

TBH I've never heard of a policy such as what you expected.

If one existed then every sole trader and contractor would have it and be laughing all the way to the bank.

AnotherJoe

I would sue them via MCOL, since returning the premium doesn't put you in the position they said they would so its wholly inadequate.

I dont think anyone here would think it was OK if your house burned down yesterday and it turned out there was a clause you didn't have visibility of, that said that if the fire occurred on a Friday there is no cover, sorry, heres your premium back.

I'd start with a Letter Before Action and follow that up with small claims (MCOL)

Nearlyold

I dont think anyone here would think it was OK if your house burned down yesterday and it turned out there was a clause you didn't have visibility of, that said that if the fire occurred on a Friday there is no cover, sorry, heres your premium back.

That's somewhat of a Strawman argument - such a clause would obviously be absurd and cover without such a clause is widely available and is the norm.

In the OPs case, the insurance companies approach is the norm and I can't think that any underwriter would offer a policy where an individual contract lost would be covered, losing a customer is part and parcel of the ups and downs of running your own business. The moral hazard would be huge - fancy a nice long holiday or an easier time - bump up prices for one of your customers - customer walks - bingo - insurance company pays you for 12 months while you put your feet up.

Goodness knows how the broker came to think he'd found such a policy.