Aviva Medios Healthcare - are we being treated fairly?
Comments
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Thank you Burtwood for ackowledging trailing of our premium monies.
The paperwork trailing seems to be equally horrendous.
Aviva's actions just seem to be 1 long trail of cheating.
Agreed we can't expect Industry Association to cut its own throat by taking on Aviva. But appreciate those late to dialogue, like PMW2012, will justifiably get annoyed. Problem is that organisations sometimes make general judgements without looking at documentation - something ACG rightly pointed-out at beginning without knowing anything about actual situation.
We must await FSA action - albeit they're also somewhat late to party.
Difficult to understand why Aviva plc does not clarify position as there must be lots of angry purchasers of its capital and other securities who must be wondering whether they have been similarly cheated. Maybe FSA will give Aviva a NUDGE in that direction as well.
Seems all our actions will include piling into FOS with complaints.
PS
1. Be interesting to see whether criminal actions are initiated against responsible Aviva executives as their misdeeds do seem to go well beyond FSA Handbook rule breaking.
2. If I had taken up Aviva's direct Healthier Solutions offering I would be even more vexed.
Amazingly, the Healthier Solutions documentation says "We ask for written confirmation of cancellations due to the potential loss of benefits to you in doing so. You are advised to call our Customer Service Helpline to discuss your options before taking this step".
No such interest with Medios policies and if one asked one was refused information!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!0 -
Begs questions about present product attractiveness. First, the Insurer has stopped New Entrants in direct breach of a crucial part of Guaranty. Not only was that breach not communicated to policyholders (apparently some might have been told recently) but instead the Insurer’s Terms & Conditions misled them to think no part of the Guaranty had changed. Next the Insurer inflicted a 10%+ Age increase, again in direct breach of Guaranty. Motivation for the Insurer’s Guaranty breaches was the massive adverse movement in Age costs over those it originally predicted. Consequently, one must conclude the Insurer intends to kill this product, come what may.
I worked until recently in the medical insurance industry, and as far as I know, there are no longer any "no age increases" style policies on sale.
The problem as I understand it was convincing younger customers to sign up to them, given that the newer NCD style policies come in far cheaper at year 1. In principle a long-term smoothing out of costs is possible, but only if future younger customers buy in to subsidise your policy as you age. Otherwise the age increases just get shared evenly across all members and the premiums can fall distinctly out of kilter with other health insurance policies as the people left behind become increasingly higher risk (people over 65 cost health insurers a much larger amount, on average).
A similar problem happened with non-NCD policies - Bupa spent years arguing that NCD in health insurance was a very bad idea, with good reasons, but they've recently introduced some very light NCDs, presumably in response to their main rivals pushing very hard on the more price competitive NCD policies.
The trend in insurance now is to buy for the short-term, get a good price, and be rewarded for proving you're a lower risk. That naturally leads towards NCDs and using age as a pricing factor.
Back to Aviva, I'm not an expert on how it runs its policies, but I would be surprised if the company explicitly invested the 'additional' premiums paid by Medios customers to subsidise future age increases - my guess is that those premiums were used to subsidise existing older members.
The 20% hike may be justified actuarially - for example, if Medios customers are getting older with no younger intake, then the performance of the product line will be steadily deteriorating as claims frequency and costs increase. In principle the book may have been running at a loss even if other areas of the business were profitable, with Aviva cross-subsidising Medios customers from their other product lines. On the face of it, this seems to be the type of correction that they've made.
It also looks a bit like a blunt attempt to get customers onto products that match up an individual's premium to their claims history more effectively. Whether this is a good thing for an individual is very difficult to call unless you have a crystal ball, but it does make for a more stable portfolio for the insurer - as people claim and flag themselves as higher risk, the insurer can naturally thump their premiums up via the NCD scale whilst still keeping a competitive price for its low-risk customers to avoid them switching for a cheaper premium.
Also, if Aviva have taken the decision to close Medios permanently (not clear, but they have closed down and migrated a lot of other products to Healthier Solutions over the past few years), then the more they can do to encourage people to move freely, the better it will be for them financially.
Whatever the reasons, if Aviva have broken their own T&Cs then I would expect FOS and/or the FSA to side with the policyholders. However, I'd be surprised if Aviva locked themselves into long-term policies with long-term price commitments and no get-out clauses.
Many insurers have been burned that way in the past, and there's usually some kind of "...these are our rules unless we change them, this is what we are allowed to change, this is when we can change it, and this is how we will inform you" statement lurking in there somewhere as a result.0 -
Maybe helpful to policyholders to clarify Wozearly’s comments as being general observations they don’t reflect documentation or, alternatively, Aviva’s responses.
Wozearly speculated that a large actuarial rate increase was the main cause for the 20% premium hike. Indeed, Aviva did initially use that defence. Then it dropped it as the relevant costs were Age Related and the Guaranty doesn’t permit the charging of Age Related costs; the particular costs involved were the extra costs of underwriting an older age group caused by Aviva stopping New Entrants. Any effort to charge policyholders for that risk change also made no sense as it was caused by Aviva’s breach of the Guaranty when it stopped New Entrants; consequently, Aviva became liable to policyholders and not the other way around. Worst still for Aviva, it then admitted its real reason was it needed help in covering the cost of its Guaranty as it had got its sums wrong!
Aviva was under a duty to provide for future Age costs in its Annual Accounts, irrespective of any investment of extra premiums received in advance of costs being expended. This is an accounting standard dictat that’s enshrined in Statute. Aviva accepted that but wouldn’t release information on Guaranty value or provisions as it claimed such information was commercially sensitive even though the product had not been marketed since January 2010. Obviously, that concealment questioned whether Guaranty provisions existed and from there was born questions over black holes in Aviva’s finances. As for any undeclared Ponzi style cross-subsidies (which jeopardise values for replacement investors), no comment is necessary as the related criminal law is well understood. Hopefully, this clears up any confusion Wozearly or anyone else has on those matters.
Yes, Wozearly is right about freedom to make premium increases. However, they can’t include elements not permitted by the Guaranty. Equally importantly, premium increases are required to be regulated by pricing applicable to New Entrants, something Aviva secretly did away with – not only did it not tell policyholders about that but it sent out Terms & Conditions for 3 following renewal years which presented New Entrants as still existing!
Annually renewable policies are not all the same when the Insurer commits to providing cover for life – albeit that’s not necessarily the case for Medios policies issued post 2005.
Aviva knows this which is why it went to so much trouble in 2005 to transform the product into something entirely different without pointing that out to policyholders. That same motivation also led to Aviva secretly stopping New Entrants.
One product transformation upon another!
Yes, Wozearly is right that insurers have been burned in the past. That happened to Equitable Life with respect to its Guaranty. Well d!jà vu, albeit Equitable Life was far cleverer with its misdeeds. As Wozearly rightfully says, Aviva’s latest misdeed/action is blunt. As for Aviva’s earlier sneaky preparatory misdeeds, they are likely to be contractually ineffective and are also likely to form the basis for breach of contract claims (as well as falling foul of FSA rules) – moreover, they are especially telling in demonstrating Aviva’s need to disarm the Guaranty so as to avoid massive liabilities. By co-incidence, Aviva’s auditors are Ernst & Young – the same auditors that reportedly got disciplined by their Institute over Equitable Life’s Guaranty debacle with a £500,000 fine and a cost bill of £2.4million.
Wozearly expects some get-out clause to exist for Aviva. However, the Guaranty did not offer that as it was an inherited policy from the CGU/Norwich Union merger in 2000 – a bit of history to add to his/her industry knowledge if not already known. It originated from CGU’s Dutch subsidiary, OHRA. More interestingly, charging for Age increases was not allowed by Dutch Law and it is from that rigid Dutch policy that the Guaranty originated. No wonder, Aviva tried to dismantle it piece by piece – or maybe by ‘hook or crook’ - to escape the Guaranty’s clutches. It wanted to transform the policy into an entirely different product – the worthless sort that Wozearly had in mind.
This is now all about detailed documentation – which is unfortunate for Aviva as the paper trail magnifies its misdeeds. Disciplines required to work through matters cover law, accounting, insurance, FSA, FOS, plus actuarial. Seems these complexities or arrogance or a mixture of both have caused Aviva’s present high risk situation as all its Guaranty liabilities could now crystallise and become immediately payable as compensation – hopefully, for Aviva’s survival, it possesses a massive cash mountain to make compensation payments (sort of reminds one of the BP compensation funding problems with regard to the Gulf of Mexico oil spill)!
Whilst long, this is not a fiction story – the large amounts of money involved motivate this sort of unacceptable behaviour – all familiar territory to the author (on the side of the good).
It is the gravity and sheer persistence of Aviva’s misdeeds that causes so much anger amongst policyholders.
Already, those misled to take-up Healthier Solutions policies have had their entire Guaranty values misappropriated by Aviva – doubtless, this is not the type of encouragement envisaged by Wozearly.
These Aviva people are not the sort to introduce to family of friends.
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As the originator of this thread I think it is time to update you on where I am with my policy and what I think I will do now.
I am still paying my new increased medios premiums.
I have written a complaint letter to Aviva and had a fairly general reply with a polite refusal to answer some of my questions.
I am going to write a further letter today to object to the price increase as a breach of contract and expect a letter back from them refuting this and directing me to the Financial Ombudsman Service if I want to take this further.
This seems to me to be the logical step to take because either they can do this or they can't and I would expect the FOS to provide some clarity.
If this does not work in my favour then there would need to be some legal opinion sought.
I was an original OHRA Medios policy holder from 1996, the policy having been taken out through a specialist broker. I bought it specifically for the age guarantee. ( Exeter were also offereing similar product at the time, I wonder what happened to that). I was not happy at the time that Aviva purchased the book of policy holders at the time but was assured everything would continue as normal.
I work as a Financial Adviser so am used to the way large insurance companies work. They are run by very clever people who understand how to manage a business and for the benefit of customers and shareholders. Mostly they get it right and we get good products service and profitable insurance companies. However sometimes they make mistakes that are not necesarily breaches of contract but get caught by the FSA with regard to appropriateness and ethics. I feel that this looks to be such a case. Time will tell.0 -
It would be helpful to know if 'burwood' and 'wozearly' are policy holders becuase they have given a lot of information and thought and I am just wondering where they stand?0
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I’m a policyholder for the same sort of period as you and am well versed in all disciplines covered by this case – it’s not enough to be a broker unless also possessing FOS claim, legal, and financial expertise and actuarial knowledge is also required to determine value of Guaranty loss.
FSA procedure is probably not now relevant to others.
Action depends upon the loss you are claiming AND interest needs to be added to the loss amount.
The Options I considered are set out below.
Option 1 is a few hundred pounds for the premium increase above medical inflation and the 1% IPT.
Option 2 is same as Option 1 + value of lost Guaranty.
Option 3 is same as Option 2 + premiums paid for 2010, 2011 and 2012.
Option 4 is for your Option 1, 2 or 3 choice + increase to account for any exclusion of existing conditions by a new insurer – particularly relevant if there are continuing claims for an existing problem.
One must remember the 20% premium hike is the tip of the iceberg – most of one’s loss is hidden below the surface. Our Guaranty was presented by Aviva in late 2000 as ”one of the most complete medical expenses insurances available in the United Kingdom” and “cover can be continued for life”.
Now we could have a worthless policy as a result of Aviva’s unexplained and unauthorised 2005 Guaranty change that allows Aviva to withdraw cover at any time. The New Entrants exclusion in January 2010 also means premiums are no longer market related, which further breaches the Guaranty. Consequently, these factors are the motivation for Option 2.
I worked out that value by using methodology detailed in a previous post – well above £50,000 for me.
Doubtless many would also not have renewed if they had known about the New Entrants exclusion in January 2010 (planned in 2009). They didn’t know about it as Aviva’s wrongdoing was not only concealed but was misrepresented within Aviva’s Terms and Conditions. Consequently, I would not have self-insured or would not otherwise have incurred premiums and therefore, ultimately, chose Option 3.
I also needed to consider existing medical conditions with respect to the Option 4 add-on.
When I complained to Aviva, I made sure I requested information about
- Guaranty value and related provisions for Option 2,
- background to and reasons for New Entrants closure for Option 3 (+ requested explanation for how policyholders’ situations had been considered).
That’s because one should only make a claim if it has been previously submitted to Aviva and no satisfactory response received.
Obviously, one cannot advise another without knowing their personal circumstances which is the reason for explaining my own choices.0 -
This is a 2 for 1 Post response so you can also understand timing aspects.
When Aviva inherited the policy from 2001, the Guaranty costs for subsequent New Entrants had to follow 11 to 19 years later (due to the requirement to undergo 1 Age Related increase on a birthday ending with zero). That meant Guaranty costs from those further unwanted New Entrants would commence from 2012.
The unexplained and unauthorised Guaranty change in 2005 was established to cause any challenge to be statute barred from 2012.
Aviva’s planned 2012 exit strategy was delayed when Aviva lost its nerve in 2011. Instead of ceasing cover, Aviva decided to go for a staggered exit that started with the 20% premium hike; the intent was to cause policyholders to relinquish their Guaranty and move onto Aviva’s Healthier Solutions Policy.
Even if the expertise was available, Aviva believed no one would invest the time and effort to unearth and trawl through 10 years plus of policy documentation.
This whole strategy must have gone all the way up the Aviva plc management tree as the 'fraud' was so long in the making.0 -
It would be helpful to know if 'burwood' and 'wozearly' are policy holders becuase they have given a lot of information and thought and I am just wondering where they stand?
I'm not a Medios policyholder.
I have spent six years working on product analysis in the health insurance market, so I'm familiar with the market (and the activities of the insurers), including the Medios range - or, at least, the post-2005 Medios range.
On your other point, Exeter Friendly stopped offering their age guarantee products a few years ago.
Burtwood - Happy to affirm that the my previous post was picking up on wider points about the market and trying to give some context beyond the Medios issue. Apologies for any confusion caused.
Personally, I'm not sure that Aviva are in breach of the policy terms - at least not in terms of the 'age-related increase'. I've included three parts from the Nov 2011 wording below;
1) Guaranteed Loyalty Bonus (p.18)
For as long as the Policy remains in force and the premium applied to each Insured Person is paid, each Insured Person will incur only one age related increase to his/her premium. The increased premium will be the premium applicable to new entrants in the age band next above the age band applied
at inception to the Insured Person.
2) Policy Duration and Premiums (p.18)
i) This Policy shall be for one year and is continuable subject to the terms in force at the time of each Review Date where the product is still offered by us.
ii) The premium payable may be changed by us from time to time. However this Policy will not be subject to any alteration in premium rates generally introduced until the next Review Date.
3) Alterations(p.23)
We may alter any of the terms of this Policy at any Review Date. A copy of the current Policy terms will be sent to the Policyholder at such time.
2 and 3 are what I referred to as typical 'get-out' clauses previously. Aviva has the ability to change the T&Cs of the policy at your annual renewal, provided they advise you of it. They may also close the policy entirely. The price will be fixed during the annual contract, but at renewal can be increased.
This is pretty standard wording for the industry.
The age-related increase part may turn into a battle of semantics, but my reading of the wording is that Aviva are referring to the policyholder's age (ie, an increase linked specifically to your own age changing).
I don't believe that this would prevent them raising premiums for all customers because of an increased underwriting risk across the entire Medios Healthcare portfolio, even if this risk was caused by increased claims due to a change in the age profile of all customers and is, therefore, "age related" in a broader sense.
The difference is that they're increasing the cost applicable to all people in the age band (allowed in T&Cs), not raising anyone to the age band above it (disallowed).
However, if changes to elements of policy T&Cs in 2005 weren't allowed by the previous t&cs then that would be a clear breach of contract and would be a strong case to take to the FSA.
Equally, I'd be curious to know how Aviva intended to determine what the premium is for new entrants when the product is closed to new business...hmm.
Ultimately, my concern is that what Aviva have done may be completely above board in legal terms. However, I hope I turn out to be wrong and that your challenge (and others' challenges) are successful.0 -
Wozeasy’s comments do not change the fact that deception took place, which might or might not constitute fraud - in the legal sense.
That’s because those Wozeasy’s comments are made on the basis that deception issues can be set aside.
The following took place and, consequently, cannot be set aside.
1. The 2005 change when the commitment “This cover can be continued for life” was changed to “is continuable subject to the terms in force at the time of each Review Date where the product is still offered by us”.
2. New Entrants being unilaterally removed in breach of Guaranty.
3. Charging renewal premiums for 2010, 2011, and 2012 whilst misrepresenting in its Terms & Conditions that New Entrants remained.
4. Aviva charging for the impact of its own Guaranty breach (it says the 20% increase was mainly caused by “the remaining members are getting older” as “The Medios policy was closed to new business” and therefore “the pooled fund is no longer sufficient to cover the risk it represents”). Nor can Aviva benefit from its own contract breach but must, instead, compensate policyholders - irrespective of Wozeasy’s play upon whether Age Related means Age Related.
5. Policyholders being told how much they could save by transferring to Healthier Solutions but Aviva failing in its duty to inform them also of the value of the Guaranty they were relinquishing. A new lamps for old fraud of the worst kind, where motivation was to avoid millions of pounds of liabilities.
If Wozeasy thinks this is just an FSA matter, that’s a mistake; albeit appreciate his experience is focussed in product analysis.
First there’s the prima facie fraud question, aggravated by (a) the long term planning of the various deceptions, (b) the duty of trust, and (c) the huge amounts of money involved.
Second policyholders’ contracts have been breached (especially relevant to FOS or the Courts).
In particular, Wozearly wrongly seems to think Aviva can change the character of the product sold and can unilaterally inflict unfair terms upon policyholders under some general alteration capability.
That’s so wrong on so many different planes.
Just one for instance is Schedule 2 of The Unfair Terms in Consumer Contracts Regulations 1999 where the following are given as examples of terms that shall be ineffective against the Consumer -
(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;
(k) enabling the seller or supplier to alter unilaterally without a valid reason any characteristics of the product or service to be provided.
Wozearly just does not appreciate that policyholders invested in Medios because of its Guaranty and its crucial characteristics of life cover and being market related (through New Entrants).
Yet Wozearly would like to set all those aspects aside and play on words – rather like Aviva ridding itself of all the millions of liabilities that it should have provided as opposed to concealing from policyholders.
The extent of Aviva's deceptions will cause policyholders to pursue Aviva until they get justice.0 -
Read all the comments.
Aviva seems to have messed-up badly.
Sins of Equitable Life all over again as a previous Post has said.
The FSA also messed-up on that one.
Real problem is that product still out there and that product is TOXIC because of Aviva's actions.
Aviva also gives a good impression of being TOXIC.
The FSA must act as this is not just about compensation.0
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