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What are loaded premiums?
Many life insurance policies were sold with loaded premiums – extra costs added by the adviser or broker, often without the customer’s knowledge. There is no industry standard or cap for the amount of commission added.
Loaded premiums can add as much as 10-30% to the monthly cost for policyholders, solely to inflate adviser commission, with no added insurance cover or benefit to the policyholder, and there have been calls for the practice to be banned.
In August 2024, the Financial Conduct Authority (FCA), the financial industry’s watchdog and regulator, announced a review of pure protection insurance products. The FCA is concerned that several pure protection insurance products, including life insurance policies, do not offer fair value to policyholders raising concerns about mis-selling.
Life insurance is a type of Pure Protection Insurance aimed to give your family financial stability and peace of mind after your death or, in some cases, upon diagnosis of a terminal illness. Many people have held such insurance for years, paying a regular monthly premium to keep the policy active.
What many people don’t realise is that they may have been able to get the same level of cover for a lower monthly premium and have been paying a ‘loaded premium’ the whole time. The loaded premium includes a portion that goes directly to pay an intermediary’s commission (such as an insurance broker) rather than towards the insurance policy itself.
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What does the FCA review include?
The FCA is reviewing the life insurance and wider protection insurance market, including ‘over 50s’ plans, critical illness cover and income protection insurance.
Among the issues identified are:
- Products that offer poor value for money
- Product “churning” (where policies are switched regularly to earn more commission)
- Loaded premiums that erode policy value over time
Since 2023 and the introduction of Consumer Duty, there has been a stronger emphasis on the financial industry delivering ‘good outcomes’ to clients. Clearly, the issues identified by the FCA are at odds with this, and offering customers ‘fair value’ must be a priority for FCA-regulated businesses.
Identifying serious issues in the industry and an ongoing FCA review mean consumers now have stronger grounds than ever to recover compensation for life insurance mis-selling.
Life insurance mis-selling claims happen when consumers are:
- Sold cover they didn’t need, such as life insurance for someone with no dependants.
- Pressurised into buying a life policy.
- Tied into costly, inflexible policy terms.
- Encouraged to unnecessarily switch to another policy so the adviser can collect another commission (‘product churn’).
- Not told the limitations of a policy, such as pre-existing medical conditions that are not covered.
- Not informed about significant increases in monthly premiums, which could make the policy unaffordable or uneconomical in the future, yet the benefits could decrease (a ‘reviewable’ policy).
- Are told they must have life insurance when this is not the case, for example, as a condition of a loan or mortgage.
- Unaware that they were ever sold a policy.
- Not advised properly of limitations, fees or commissions, including ‘loaded’ commissions or premiums relating to the life policy.
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What should I do if have been mis-sold life insurance?
If you or a loved one have paid into a life insurance policy and are now questioning whether it was right for you, you’re not alone and might be entitled to compensation.
Acting on behalf of clients on a ‘no win, no fee’ basis, TLW Solicitors specialise in consumer financial claims and refunds. Get in touch to see if you may be eligible to claim.
Life insurance mis-selling claims FAQs
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What are loaded commissions or premiums?
Loaded premiums are hidden charges added to your monthly policy cost, usually to pay commission to the adviser or broker. These extra costs increase what you pay without improving your life insurance cover.
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What do I need to provide to start my claim?
We will need the following details to start investigating your mis-selling claim:
- Up-to-date ID
- Up-to-date proof of address
- Details of who sold you the life policy/policies
- Reference numbers for the life insurance products involved
- If you still have your life insurance policy documents, that’s helpful, but not essential. We can often gather the necessary evidence from your provider.
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How long does a life insurance mis-selling claim take?
Once a formal complaint about life insurance mis-selling is made, the product providers must investigate the case and make a decision within 8 weeks.
If your claim is rejected or you do not agree with the provider’s findings, the claim can be escalated to the Financial Ombudsman Service (FOS). FOS is a government-backed, independent body responsible for settling disputes between financial businesses and their customers.
FOS claims may take several months to complete. Making a claim can be complex and time-consuming – our specialist consumer lawyers understand the claims and appeals processes, the information needed and the time limits to be followed. We have up-to-date digital case management systems enabling us to proactively pursue your claim to ensure you get the best results as quickly as possible.
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Step-by-step guide on how to claim compensation for mis-sold life insurance
The circumstances of each mis-selling case are different, but our general claims process follows these steps:
Step 1 – You give us the information we need to determine whether you have a valid complaint for the insurance mis-selling by whoever sold you the policy, be that the insurers themselves, a financial adviser, broker etc. If having reviewed that information, we are happy to go ahead and investigate your case, we will securely send you our online agreement via e-sign for you to review and return.
Step 2 – Based on the information provided and using our technical knowledge and expertise of these cases, our team will draft the complaint and send to whoever sold you the policy/policies. We will decide whether it is necessary to obtain your file or other details and, if so, we will send a data subject access request on your behalf.
Step 3 – When we get a response from whoever sold you the policy, we will advise you on the next course of action, including whether any offer made is reasonable and should be accepted – if we advise that you should not accept the offer, we will give our reasons why. If appropriate, we will then prepare your case for submission to the Financial Ombudsman Service (FOS).
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How do you work out the value of my life insurance mis-selling claim?
The value of your claim will depend on a wide range of factors including the type of life insurance products you have been sold, the age of the policy, the wording of the policy, your individual circumstances (eg health, family members, age), premiums paid etc. Each case is unique, and our specialist team will ensure that we aim to recover what you are rightfully owed.
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What will making a claim for mis-sold life insurance cost me?
We offer a free, no-obligation assessment of your case to see if you may be eligible to make a claim. If we take on your case, we work on a ‘no win, no fee’ basis, meaning that you do not pay us anything if your claim is unsuccessful. If we win your case, what we will charge you will depend on the amount of compensation you receive.
Our costs are governed by the Solicitors Regulation Authority. More details of which can be provided to you before you decide if you wish to proceed with a claim.
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Why should I use TLW Solicitors to deal with my insurance mis-selling claim?
We offer:
- A free, confidential case review to see if you are eligible to make a claim.
- A ‘no-win, no-fee’ service.
- Clear, jargon-free communication in plain English throughout the process.
- A dedicated case handler who you can contact with any queries, issues, concerns, or if you need any clarification about the claim process.
- Industry-leading case management systems to ensure that your claim is progressed efficiently and you are kept up to date at every milestone.
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What if the insurer, adviser or broker is no longer trading?
If the firm that arranged or sold you the policy has closed or gone out of business, you may still be eligible to claim compensation through the Financial Services Compensation Scheme (FSCS), a lifeboat scheme set up to compensate victims of failed FCA regulated financial businesses.
Get in touch with TLW Solicitors
At TLW Solicitors, we have many years of experience handling financial consumer claims, helping clients recover compensation for a wide variety of mis-sold financial products. We work on a ‘no-win, no-fee’ basis and provide a free, confidential and no-obligation initial assessment of your case. If we decide you are eligible to make a claim, we will deal with it from start to finish, giving you peace of mind and saving you time.
