investment case round-up

32/12
life assurance policy – request for waiver of premiums made ‘too late’ – whether firm should reconsider granting the request

After suffering a heart attack, Mr F needed heart bypass surgery and he was seriously ill for some months. Nine months after his heart attack, Mr F contacted the firm to ask for a ‘waiver of premiums’ for his life assurance policy (in other words to suspend his payments for a period). He was still not well enough to return to work, even part-time, and his earnings had been substantially reduced.

When the firm told him that it was unable to consider his request, Mr F came to us.

complaint settled
Under its policy conditions, there were certain circumstances in which the firm could allow policyholders to suspend payments temporarily. These circumstances included ill health, but the policyholder had to apply within six months of becoming ill. So the firm said Mr F had left it too late to apply.

Mr F and his wife told us that the months following his heart attack had been very traumatic and there had been some doubt as to whether he would survive. Mrs F said that her only concern during this period had been her husband’s health. It was only when his condition improved that they were able to start thinking about other matters, including their finances.

We accepted that the firm was not under any contractual obligation to agree to the couple’s request. However, we suggested that in view of the couple’s circumstances and the seriousness of Mr F’s illness, it should review its decision. The firm agreed to waive the premiums for a certain period.

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32/13
medium-risk ISA sold to cautious investors – whether adviser explained risk of investment

Mr and Mrs D lived on a very modest income and had no investment experience. They were very pleasantly surprised when they inherited £14,000 from a distant relative. After seeking advice from an independent financial adviser, they invested all of the money in a medium-risk Individual Savings Account (ISA) fund.

Two years later, very disappointed with the ISA’s performance, they complained to the firm, saying they would have been better off leaving the money in a simple deposit account. The firm told the couple that some degree of risk was inevitable with the type of investment they had chosen, so they came to us.

complaint upheld
The adviser agreed that the couple had been inexperienced and cautious investors. However, he said that once he had explained to them how ISAs worked, the couple ‘became more at ease with the idea of adopting a medium-risk investment approach’. Mr and Mrs D denied that their attitude to risk had changed, as the adviser suggested. They said he had not discussed risk at all.

The adviser told us he had advised Mr and Mrs D to invest only £10,000 of their inheritance. And he said he had suggested they put half of this in the ISA and the remainder in a low-risk bond. He said the couple had ignored this advice and wanted to invest all of the money they had inherited and to put it all in the ISA. So he said that he had carried out the couple’s instructions against his better judgement.

We pointed out to him that the letter he had sent the couple shortly after their meeting had recommended investing the full £14,000 in the ISA. And his notes of the meeting with Mr and Mrs D recorded that they were cautious investors. If the couple had indeed acted against his advice, then we would have expected him to have made a formal note of this.

We concluded that the advice had been inappropriate and we told the firm to pay the couple the difference between the current value of their ISA investment and the amount they would have got if they had put the money in a straightforward deposit account over the same period.

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32/14
endowment policy cashed in early – whether policyholders entitled to at least a proportion of the terminal bonus

Mr and Mrs B decided to cash in their endowment policy a year before it was due to mature. They were very disappointed when the firm said they were not entitled to receive a terminal bonus. It said this was only payable to policyholders who held on to their policies until the maturity date. But the couple said that since the policy only had a year to go before it matured, the firm could at least give them a proportion of the terminal bonus.

Dissatisfied with the firm’s response, Mr and Mrs B came to us. They said that they had been discriminated against because the firm had treated them less fairly than other policyholders. They claimed there was nothing in the policy’s terms and conditions that excused such discrimination.

complaint rejected
We examined the terms and conditions of the policy, together with other documents the firm had sent the couple. We wanted to check there was nothing that might have led them to believe they would get some form of terminal bonus if they cashed in their policy early. However, we found nothing to support the couple’s view.

We pointed out to Mr and Mrs B that it was entirely a matter for the firm’s commercial judgement whether policyholders should get any proportion of the terminal bonus if they cashed in their policies early. The rules under which we operate say that ‘The Ombudsman may dismiss a complaint without considering the merits if he… is satisfied that it is a complaint about the legitimate exercise of a firm’s commercial judgement.’ (Rule 3.3.1(11)).

We therefore dismissed the complaint.

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