Not a single whole-of-life insurance policy has been found to have been mis-sold in the past five years despite more than 830 such complaints being lodged in the same period.
Complaints to the financial services ombudsman peaked in 2012 with 218 being lodged against insurers and brokers while a further 105 were registered last year.
Whole-of-life policies pay a specified amount at the time of the policyholder’s death but are subject to reviews — typically every 10 years to the age of 70 — which can see insurers hike the cost of the policy, making payments far more difficult to make.
Customers can then be faced with the unenviable decision of whether to pay the higher premium or cancel the policy and forego the benefit of the investment they’ve already made; potentially ending up with no life assurance cover as a result.
As issues often only come to light up to 10 years after the policy is taken out, the ombudsman’s ability to investigate such claims is hamstrung by the fact that it can only look into complaints submitted to it up to six years after a financial product is bought.
A full-scale report along the lines of the Central Bank’s review of payment protection insurance is needed to deal with the issue and the potential legislative gap created by the six-year rule, according to Fianna Fáil finance spokesperson Michael McGrath.
“The long-term nature of many financial products — including whole of life assurance, payment protection insurance policies and endowment mortgages — means problems often only emerge well beyond the six- year limit,” he said.
“It is grossly unfair that these consumers are being prevented from having their case heard by the financial services ombudsman. The result of the rule is also that financial services firms who have mis-sold products to unsuspecting consumers can continue to get off scot free,” said Mr McGrath.
The ombudsman said it is unable to give the number of complaints that were upheld as a result of the manner in which it collects data on life assurance policies but said no findings on the mis-sale of such policies have been issued since 2010.
Legislation proposed by Fianna Fáil suggests allowing consumers make a complaint up to three years after they become aware of a problem, rather than six years after the financial product is purchased.
Last November, Finance Minister Michael Noonan said he was aware of the need to provide the necessary protection to consumers.
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