Life Insurance News

Consumers have been warned by the Financial Services Authority (FSA) to be cautious about whole-of-life insurance policies having received an increase in complaints from customers who were mis-sold policies.

A total of 5442 complaints were made to financial ombudsman Walter Merricks, with the majority of disputes resulting in compensation for the consumers who were mis-sold policies last year.

Unit-linked policies proved to be the main source of dissatisfaction, a niche product which was created during the mid-1980s and sold in the following decade by aggressive insurance sales forces.

It was billed as the solution for protecting families in early life, whilst offering protection against inheritance tax in the later stages of living.

Those companies that have withdrawn from the market include; Norwich Union, Standard Life, Aegon UK and Legal & General.

David Cresswell, Ombudsman spokesman, said: "There are a range of problems with these policies, and we are worried about the way they are being specifically targeted at the elderly through day-time TV.

"Worries about funeral expenses start to prey on their minds. This can lead to them signing up for premiums which they may not be able to afford on very limited incomes.

"We get complaints that people pay these things for years until they have paid in far more than they could ever get out, but have to keep on paying or they get nothing back.

"In many ways, these are a risk investment, and it may not be appropriate for elderly people with little money to be embarking on this kind of risk. As always, our concern is that they fully understand what they are signing up for."