Insurance cancelled after I've paid the prmiums?

johne53

Decades ago (probably the 1990's or even as far back as the 80's) I took out an insurance product called the NatWest Hospital Income Plan. It offers to pay me a weekly income if I ever need to go into hospital (though luckily, I've never needed it). Like most insurance products it got passed from one insurer to another - ending up with Sun Life, then FirstAssist and now Cigna. Right out of the blue I've received a letter from Cigna telling me they won't be renewing my policy when this year comes to an end. This isn't through any fault on my part - they've simply decided to abandon my cover.

But of course I'm now 30 or so years older than when I first took the policy out (i.e. now at an age when I'm more likely to need it). I've literally paid thousands of pounds in premiums - so is it legal for the insurer to say "thanks for all the premiums mate but we ain't gonna cover you any more" ??

Quentin

Yes it is

You were allowed to cancel at any time and so was the insurer

This will all be set out in the policy

(They aren't cancelling during the period you have paid the premium for!)

johne53

Thanks Quentin - I've heard so many similar tales to this and it's annoying how the normal levels of decency never seem to apply in the financial services industry. When I was younger I spent 25 years paying into an endowment mortgage and literally a month before it ended, the endowment provider wrote to tell me they wouldn't be paying me! They were willing to pay some of the money but they'd decided to make something called a "market value reduction". I spent weeks reading through every document I'd ever received from them and there wasn't a single mention of any market value reduction anywhere. But that didn't stop them from deducting more than a quarter of the money they owed me.

Paul_DNAP

It does not matter how many years you've been paying for the product, it isn't a long term investment or savings plan, it's a yearly insurance cover. You pay one year's premium and get one year's cover. At the end of that year that money is gone, and you pay another year.


They are not cancelling you policy as it sounds like that they will honour the period you've already paid for.


It is perfectly reasonable for them to say "we won't offer this product next year" and it's decent of them to give you advance notice to be able to start to source an alternate product that meets your needs for the next year. And any talk of "is it legal" is just nonsense, to be blunt.

SonOf

so is it legal for the insurer to say "thanks for all the premiums mate but we ain't gonna cover you any more" ??

It is not a protected policy and is annually renewable. So, yes they can.

This type of plan is reliant on volume of policyholders existing. In the end, it ceases to be unviable to continue offering it.

it's annoying how the normal levels of decency never seem to apply in the financial services industry.

In all walks of life, things get discontinued. New versions come out etc.

When I was younger I spent 25 years paying into an endowment mortgage and literally a month before it ended, the endowment provider wrote to tell me they wouldn't be paying me!

Who were they paying it to then? They would pay the policyholder unless the policy was assigned to a lender or placed in trust to a beneficiary.

They were willing to pay some of the money but they'd decided to make something called a "market value reduction".

So, they did pay you. However, MVRs are not charged on maturity. Only on early surrender. MVRs exist for logical reasons and prevent other policyholders losing out because you wanted to break the terms of your contract early.

johne53

SonOf wrote: »

Who were they paying it to then? They would pay the policyholder unless the policy was assigned to a lender or placed in trust to a beneficiary.

The endowment provider was Legal & General. The endowment itself was (initially) assigned to a mortgage lender but I'd managed to pay off my mortgage early (so I just kept the endowment going as it wasn't worth cashing it in early).

SonOf wrote: »

MVRs are not charged on maturity. Only on early surrender.

No - this was definitely charged on maturity (and even though there was nothing in the policy that allowed them to make any such deduction).

johne53

SonOf wrote: »

In all walks of life, things get discontinued. New versions come out etc.

That's absolutely true of course but it's missing the point... the point is that in any other industry there's a general acceptance that if one person sticks to their side of an agreement, the other party will honour their side. The only place where that doesn't seem to hold true is the financial services sector. Customers can spend decades (literally decades) investing in a financial product - but when a time comes where they might benefit from that investment, the finance company will use every trick in the book to avoid its obligations (including simply cancelling the contract). I know it's all "caveat emptor" etc but even if it's not technically illegal, I can't be the only person who finds that kinda thing indecent ??

lisyloo

I made a mis-selling claim over an L&G endowment and was put back into the position as if we’d not taken it (£1500 from memory).

Did you complain formally?

Takmon

johne53 wrote: »

That's absolutely true of course but it's missing the point... the point is that in any other industry there's a general acceptance that if one person sticks to their side of an agreement, the other party will honour their side. The only place where that doesn't seem to hold true is the financial services sector. Customers can spend decades (literally decades) investing in a financial product - but when a time comes where they might benefit from that investment, the finance company will use every trick in the book to avoid its obligations (including simply cancelling the contract). I know it's all "caveat emptor" etc but even if it's not technically illegal, I can't be the only person who finds that kinda thing indecent ??

You said that they have simply stopped the policy and won't be renewing it. That is a pretty acceptable thing to do and like other have said either party can chose not to renew the contract. The contract was not "cancelled" in any way it will simply come to an end.

johne53 wrote: »

Right out of the blue I've received a letter from Cigna telling me they won't be renewing my policy when this year comes to an end.

I can give many examples of other industry where this happens if you think this only happens in the financial services sector:

-Mobile phone tariffs quite often come to an end and people either have to move to another one or they are not renewed at the end of the term
-TV packages such as Sky for example; people on Sky Analog were unable to renew their contracts when the service ended unless they changed to Sky Digital.
-Magazine Subscriptions coming to an end when the magazine is discontinued.
-DVD rental services such as Lovefilm coming to an end.

There are so many examples of products where people pay for many years which come to an end that i'm surprised you don't know this.

johne53

lisyloo wrote: »

I made a mis-selling claim over an L&G endowment and was put back into the position as if we’d not taken it (£1500 from memory).

Did you complain formally?

Hi lisyloo - re: the endowment, yes I did complain and I eventually escalated it and passed it to the regulator (which in those days was the old FSA). But the FSA had quite a poor record when it came to upholding complaints and I got nowhere with them

Quentin

FSA was not the authority to complain to

They should have directed you to the complaints procedure which was to escalate to the FOS after first following the insurers complaints procedure