Personal accident insurance: mis-sold policies

Types of complaints we see

Customers complain to us that they were mis-sold a personal accident policy. We find this is usually because they:

• didn’t understand the nature of the policy they were applying for
• thought the policy would provide benefits in different circumstances than it actually does
• already had cover
• didn't apply for the policy at all and say it was added without their knowledge to another product

Common misunderstandings we see from customers are that they didn’t realise that:

• their policy doesn’t cover them for illness or disease
• death or bodily injury has to be caused by an accident in order for the policy to pay out

What we look at

Customers often complain that they weren’t made aware the policy only covered them for accidents, so we look carefully at the information they were given at the time of the sale.

Even though personal accident policies are usually non-advised sales, you should still make sure that your customer is given enough information to make an informed choice. Documents need to be clear, fair and not misleading, so that customers can decide whether: 

• to take out the insurance
• the insurance is right for them

You need to draw the customer's attention to any significant and unusual features of the policy like key exclusions and restrictions on cover. We’ll look for evidence to see whether the customer was reasonably aware that they were paying for personal accident insurance. 

Depending on the type of sale, the key documents we’ll look for are:

• a copy of the sales script the business would have used
• copies of any marketing literature posted or given to the customer
• the application form
• any fact find or recommendation letter mentioning the cover
• a sales quote
• key features
• policy terms
• a copy of the customer’s bank statement showing the transaction

How the policy was sold

We’ll look at the information given to the customer at the point of sale. We’ll decide if it:

• clearly explained how the policy worked
• highlighted any key exclusions or limitations

If the policy wasn’t clearly explained in the documents given to the customer, we may conclude the policy was mis-sold.

Where a customer says they have cover elsewhere, this wouldn’t necessarily mean the policy was mis-sold – especially if the sale was non-advised. We’d need to consider the information carefully to make sure it was clear and allowed the customer to make an informed choice about purchasing the policy. If the sale was advised, we’d consider what other insurance cover the customer had and whether you were aware of this before you sold the policy. 

If the customer says they didn’t know they had the policy, we’d need to think about whether you did enough to make the customer aware of it, and whether the customer agreed to the sale. 

The customer’s bank statements might be helpful in this situation to see how clear their direct debit was. This will help work out whether we think it’s likely the customer knew about the policy.

Group schemes

Employers can complain to us about the sale of a group policy if they meet the definition of a micro-enterprise.

Putting things right

Our general approach is to recommend that you put your customer back into the position they would have been in if you hadn’t made a mistake. But as part of our investigation, we’ll also consider any claims paid out under the policy.

If the complaint is against the insurer then we’d ask them to cancel the policy and refund the premiums the customer paid, with interest at 8% simple per year, less any tax due.

If the policy was sold by a broker or IFA, we’d ask them to pay compensation equivalent to the amount the customer paid in premiums. This is because the broker or IFA doesn’t keep the premiums – the premiums are passed on to the insurer. 

Sometimes, we might think a policy has been mis-sold but we’re satisfied the customer hasn’t been disadvantaged, so we might think the customer would still have bought the policy and therefore haven’t lost out as a result. In these cases, we might consider making an award of compensation for any stress and inconvenience that your mistake has caused the customer.

In some cases, we may tell you to pay a claim if we decide an exclusion or restriction was unfair or unusual and wasn’t brought to the customer’s attention – or if the customer could have bought a policy elsewhere which would have covered their claim.

We may decide that the mis-sale meant that your customer relied on statements and representations made by you. In these cases we may say that compensation should be paid either for the stress and inconvenience caused to the customer, or for the full amount of their claim under the policy.

Resources

Find out more about the rules and legislation we use to help us in dealing with complaints about mis-sold personal accident insurance.

• Insurance Conduct of Business Sourcebook (ICOBS)
• Treating Customers Fairly