Bobby's insurer rejected his claim saying that they looked at profit not turnover. He asked us to investigate to make sure that this was fair.
Bobby had his own business as a self-employed catering machine repairer. He took out an insurance policy through his bank which would pay him a monthly income if he became too ill to work.
The policy said it would provide a weekly income benefit of £90 if he suffered a disability that lasted more than 13 weeks.
But when he submitted a claim six years later, the insurer turned down his claim. They said that it was because his earnings were too low. They explained that the benefit payable under the policy was based on his profit, not his turnover.
Bobby hadn't made any profit in the previous year, so the insurer said he wasn't entitled to receive anything. Bobby was confused about this and complained. He said that the bank hadn't really explained how the policy worked. He said that the examples they'd given him to illustrate the policy benefits had been misleading.
The bank denied that its salesman had made any error in its recommendation. They also said that it wasn't the salesman's responsibility to explain about the benefit payment depending on Bobby's earnings.
What we said
We took a look at both sides of the story and the evidence available. It didn't seem like the bank had made sure that the policy they sold to Bobby was suitable for his needs.
We saw that the bank didn't make it clear how the benefits would be calculated. If the policy was properly explained to Bobby, he would never have bought it. It should have been shown to him that he couldn't have made a successful claim unless his earnings increased significantly.
But we didn't think that Bobby would have been able to get a policy that calculated benefits on the basis of turnover. So we didn't think the insurer was liable to meet the claim.
We believed that Bobby wouldn't have bought the policy if the bank had explained it properly. So we told the bank to refund Bobby the full cost of his premiums plus interest, as well as £250 compensation for distress and inconvenience.