Income protection (sometimes known as permanent health insurance or “PHI”) is a long term insurance contract which is designed to provide a replacement income if the consumer becomes unable to work due to illness or injury.
It is not the same as loan protection or payment protection insurance (PPI), which usually only provide short term benefits. This note does not cover these types of policies.
Income protection generally has a “deferred” period in which no benefit is payable even though the consumer is not working. This period can range from four to 104 weeks (two years) – reflecting the duration of any sick pay the consumer will receive from their employer, or any other accident or sickness policies they may have.
A policy will have a fixed term – usually up to the consumer’s retirement age – and is permanent, which means that it does not have to be renewed annually. It also means that the benefits, once the insurer has agreed to pay them, are guaranteed to continue until:
So we do see cases where the consumer has claimed more than once under the policy.
Most income protection policies are stand-alone plans. In other words, they usually provide income protection cover only, and are not normally “bundled” with other benefits or taken out with a mortgage.
To make sure the consumer has a positive incentive to return to work – and because benefits are generally paid tax-free – income protection policies usually provide anywhere between 50 to 75% of the consumer's pre-disability income, less state benefits and any other continuing income from similar accident or sickness insurances. There is more information about this under financial assessment.
Most of the cases we see involve one or more of the following issues:
We sometimes see cases where the consumer is not the policyholder – because their employer took out the policy. Whether the consumer is able to complain to us will depend on whether the policy was taken out for their benefit.
Normally, employers take out group income protection policies on behalf of their employees – so individual employees can complain to us. In these cases, the employer will be the policyholder. This means that any award we make will go to the employer rather than the consumer because the consumer is not party to the insurance contract.
Communication issues might also arise if the insurer insists on contacting the policyholder rather than the consumer directly.
We may not be able to look into complaints against IFAs involving advice or maladministration before 14 January 2005 where the policy does not include an investment element – for example, a “surrender value” (an amount of money payable to a consumer when the policy expires).
When we consider a case, we sometimes have to reach a conclusion about the consumer's level of disability (sometimes referred to as “incapacity”).
This can be broken down into four main types – referring to whether the consumer is unable to perform:
Some policy terms start off referring to the consumer’s "own occupation" but change to one of the other definitions after the claim has been paid for a period of time – usually 12 or 24 months. So we will carefully review the terms of the policy in question.
Totally unable by reason of illness or injury to follow their own occupation(s) and is not following any other occupation.
This is an example of the typical wording in an “own occupation” policy – though the precise wording will vary from policy to policy. “Own occupation” usually means the occupation the consumer was performing immediately before they became disabled.
When assessing a consumer’s inability to do their job, an insurer will usually consider the generic duties of that occupation – rather than the consumer’s specific role.
For example, a consumer may be totally unable to perform the duties required of their specific role as head accountant at their particular employer – but they may be able to perform some of the essential duties of the generic occupation of “accountant”.
The consumer's previous job might have involved long hours, extensive travelling and significant stress. But these factors may not be an integral part of the generic occupation itself – and may not exist in a different working environment or with a different employer.
However, some group policies are phrased in a job-specific way – meaning the benefit is payable only if the consumer is unable to carry out that job for that employer. So if an employee is experiencing stress arising from their particular role for their particular employer, there could be a valid claim under the policy.
Totally unable by reason of illness or injury to follow their own occupation(s) or any other occupation to which they are suited by education, training or experience.
An element of judgement is needed when deciding what occupation a consumer is suited to. We would consider whether the business’s suggestions of suitable occupations are fair and reasonable – based on factors such as the consumer’s professional qualifications, skills and previous work experience.
Totally unable by reason of illness or injury to follow any occupation whatsoever.
The terms of an income protection policy may state that the consumer will only receive benefits if they are unable to carry out any occupation at all. But a strict interpretation of this could lead to an unfair outcome – so we will carefully consider the circumstances of each individual case to decide whether the insurer has acted reasonably.
“Any occupation” definitions significantly limit the scope of the cover. So we will check that this was clearly explained to the consumer when the policy was sold. To do this, we will consider the policy documentation – for example, key features documents, personal illustrations or any endorsement signed by the consumer.
Where we are satisfied that the consumer was made aware of the limited level of cover – and the definition uses the phrase "any occupation whatsoever" – then we will consider the consumer’s ability to perform any occupation.
But we will interpret “any” in a reasonable way – based on the individual facts of the case.
Unless we think that the policy states the limits of the cover very clearly – and these were fully explained to the consumer at the point of sale – we are unlikely to decide that benefit should only be paid where the consumer is completely unable to carry out any occupation whatsoever.
ombudsman news 40 (Sept/Oct 2004) discusses what is meant by “any occupation” – referring to the Court of Appeal case of Sargent v GRE (UK) Ltd. The court found that the phrase “any occupation” was ambiguous – and that it should be interpreted in favour of the consumer, rather than the insurer. This judgment broadly corresponds with our fair and reasonable approach to these cases.
Some policy terms specify that the consumer must experience "total disability" to receive benefit. But we generally say that a strict interpretation of this is unfairly restrictive – and a reasonable interpretation should be applied.
This involves looking at whether the consumer is totally unable to perform the essential or material and substantial duties of their own, suited, or any occupation (depending on the policy) – rather than all the duties of their occupation.
For a claim to be paid, the consumer will need to show that they are totally unable to perform a certain number of activities of daily living (or work). These could be specific tasks – for example, eating, dressing and undressing or washing and bathing – or actions like lifting, standing, sitting and bending.
The level of benefit payable is usually a set amount, which will be specified in the policy. But it can be difficult for a consumer to show that they are totally unable to carry out the activities – and so to make a successful claim.
Generally, insurers offer this type of cover to people who are not working at the time of the application – and so have no income to protect. Or it might be offered to people in heavy manual occupations, where the likelihood of a claim being made under normal cover terms is higher. We will consider whether this was adequately explained to the consumer when the policy was sold.
Under the Equality Act 2010, an employee has the right to ask their employer to make “reasonable adjustments” to enable them to carry out their work.
The Equality Act 2010 came into force on 1 October 2010, replacing a number of Acts which dealt with different types of discrimination separately. For events that took place before 1 October 2010, the relevant legislation is the Disability Discrimination Act 2005.
An insurer might reject a claim (or stop paying benefit) under an income protection policy, saying that the consumer could resume work if their employer made “reasonable adjustments” in the workplace.
An insurer may sometimes insist that a consumer pursue their right to demand reasonable adjustments – even if the consumer is not sure that this is appropriate or is unwilling to do so. Their employer may have refused to make adjustments – or may have said that it thinks they are unreasonable.
In these circumstances, we will consider whether the consumer has taken positive steps to see if they have the right to ask for assistance in returning to work. If we think they have, we will then look at whether they have tried to persuade their employer to make reasonable adjustments.
If the insurer and the employer disagree about making reasonable adjustments, the consumer can be left in a difficult position. Where the consumer has concerns about or difficulty with challenging their employer, we will consider what support the insurer offered them.
Given the purpose of the product, a consumer complaining about income protection insurance may be in poor health and without an income. We bear this in mind when considering complaints.
We often need to decide whether the consumer is unable to work as defined by the terms of the policy. But we are not medical experts – we will not make a medical assessment and our conclusions can only be based on the expert evidence we see.
If we receive conflicting medical views, we will weigh up the evidence and make our decision on the balance of probabilities. We will take into account the relative qualifications of the medical experts involved, and whether the expert actually examined the consumer or based their opinion on a desk review of notes instead.
There is more information about our general approach to complaints about misrepresentation and non-disclosure in our online technical resource.
Most income protection cases involve either the rejection of a new claim or the termination of an existing claim. We will assess the evidence in the same way in both situations.
However, for new claims, the consumer needs to demonstrate that they are “totally disabled” based on the policy’s definition of disability. On the other hand, it is for the insurer terminating an existing claim to show that the consumer is no longer “totally disabled”.
We will assess the medical and other evidence provided against the relevant definition of disability in the policy. But it is not our role to make medical assessments – we will make our decision on the balance of probabilities.
Generally, an expert opinion on the consumer's level of disability is more useful than evidence like GP’s notes, test results (which can be misinterpreted, though they may be useful in showing the history of the illness), or the consumer's own account of their symptoms or level of disability.
We might receive medical evidence from a general practitioner, occupational physician, treating specialist or independent specialist.
Where we see conflicting evidence, we will consider how much weight to place on each opinion. For example, we look at the qualifications the doctor or expert has in the field in question – as well as how well they know the consumer and their capabilities.
ombudsman news issue 24 (January 2003) explains our general approach to assessing medical evidence.
A consumer may have concerns about whether a specialist instructed and paid for by a financial business is independent. We also hear similar concerns from businesses who say that the treating consultant or GP is likely to be less reliable because of their responsibility for and involvement in the consumer's long-term care. We rely on the professional expertise and integrity of all these individuals. Where the insurer has asked a relevant expert for an opinion, we will check whether it quoted the correct definition of disability and explained terms such as “totally disabled” when it asked.
Surveillance will usually be in the form of a video – but the business might only send us the private investigator's report. If the business wants us to take a video into account in our decision, we will generally need to see it for ourselves.
When we look at video evidence, we will consider whether it shows the consumer carrying out their normal occupation – and how accurately the consumer stated their level of disability to the insurer. However, even if we think the consumer overstated their level of disability, the complaint may not be rejected on this basis alone.
Video evidence is not always conclusive. It generally only covers a limited period of time – and does not often show activities that are directly relevant to the consumer's occupation. For example, footage of a consumer visiting the supermarket – or even a DIY store – does not necessarily indicate that they can perform their pre-disability occupation.
Where there is a conflict of evidence, we generally rely on medical evidence over video evidence. But if the insurer has asked a medical expert to comment on the video – for example, on whether the activities shown are consistent with the claim and/or their previously-stated opinion – we will take this into account.
Video evidence which has not been commented on by a medical professional is unlikely to be useful in deciding the complaint unless it shows very clearly that the consumer has contradicted themselves – for example, showing them driving when they have said that they can’t.
We will check that the consumer has had an opportunity to see the video – and if not, we will arrange for this to happen. If the business refuses to allow the consumer to view the video, it cannot rely on the video evidence to back up its decision and we will not consider it.
function capacity evaluations (FCEs)
FCEs are tests which usually involve the consumer carrying out a series of weight-resistant exercises under the supervision of a physiotherapist.
From the computerised results and observations, the physiotherapist will reach conclusions about the consumer’s objective level of disability and the kinds of tasks/occupations they could – in theory – carry out. The physiotherapist will also observe and note any inconsistencies in functional ability when the consumer is distracted and/or in the waiting room.
FCEs might be useful in the early stages of a claim to help the insurer identify potential issues and prompt further medical investigation – but they are unlikely to be sufficient evidence to decline a claim on their own.
For example, a report might conclude that the consumer made a “sub-optimal effort” in the test – which the insurer may interpret as “exaggeration”. But we will not assume this is the case. It could be that when asked to carry out an activity, the consumer is trying to avoid pain (real or perceived) or worsening their condition. Pain avoidance is not the same as exaggeration.
The usefulness of this type of testing is also limited to a few physical conditions, such as back pain or musculoskeletal problems.
So although they can be useful in adding to the overall weight of evidence, FCEs are unlikely to be decisive in resolving a case.
Claims visits may be arranged by the insurer as an information-gathering exercise, usually in the initial stages of a claim. The claims assessor is often a registered nurse (RGN), who will visit and interview the consumer at home to assess financial and medical aspects of the claim.
These reports can provide useful background information – for example, on how the consumer manages at home and the medication they are taking. But although the assessor sometimes gives an opinion on the consumer's level of disability, it is unlikely that this will be decisive if we are considering a complaint.
assessments for state benefits
A consumer claiming under an insurance policy may also be receiving state benefits (usually Employment and Support Allowance). We will consider Department for Work and Pensions (DWP) work capability assessments and other DWP documentation alongside other evidence.
other clinical practitioners
These could include any trained professional involved in the consumer's care – but we are most likely to see reports from physiotherapists, occupational therapists, osteopaths and psychologists.
We might not place as much weight on these reports as we would on evidence from a consultant specialist. But these professionals often have considerable involvement in the management of the consumer's care and can give useful information about their rehabilitation.
An insurer may be reluctant to meet a claim if the consumer's condition has not been clearly diagnosed. However, diagnosis is not usually a contractual requirement of these policies – and we would not decide not to uphold a complaint just because a diagnosis had not been made.
In these cases, we assess how far the consumer is “totally disabled” in line with the policy – even though there may not be a clear explanation for their symptoms. And we would check whether the insurer had made it clear to the consumer how they needed to go about demonstrating this.
A consumer might have concerns about their condition reoccurring if they returned to work – for example, if they have experienced heart disease, stroke and/or stress. In this situation – if we agree the consumer is currently capable of working – we would consider the evidence for the risk of relapse.
It is not our role to manage claims – we will always try to resolve the dispute using evidence that already exists. But occasionally we might need to obtain new evidence – which could mean asking the insurer to refer back to one of the medical experts.
Very occasionally, we think that an independent medical examination is necessary to help us decide a complaint. We generally ask the financial business to nominate and meet the cost of a suitable expert – making sure the consumer is asked for their agreement to this expert before they are appointed.
We have a duty to be careful when disclosing confidential or sensitive medical information. In the interests of “natural justice”, we will explain the basis of our decisions to the parties to a complaint. In complaints about income protection, this will usually involve referring to the medical evidence we have relied on to reach our conclusions.
But we do not generally send medical reports we have obtained independently to the consumer directly. Instead, we will forward the reports to their GP and tell the consumer we have done this.
Medical reports paid for by the financial business remain the business’s property and we will need to get permission before releasing them to the consumer’s GP. However – like video evidence – the businesses can only rely on evidence they are prepared to disclose to the consumer and to us.
In some complaints, the claim itself has been accepted but the consumer is disappointed with the amount of benefit they are receiving.
We will first check that the insurer’s calculation is correct. If it is, we will explain to the consumer in a clear and straightforward way how the policy works and how the benefit is calculated.
Income protection policies are not intended to fully replace the consumer’s income. They will typically provide 50% to 75% of the consumer's pre-disability income, less state benefits and any other continuing income from other similar policies (see "deductions for other insurances"). This ensures that the consumer is not better off than when they were working – so there is no financial penalty for returning to work. The policy wording often refers to this as the “limitation of benefit” clause.
We see complaints involving:
At the time he makes a claim, Mr A is an employed office worker earning £10,000 a year and has a policy that will provide 75% of his pre-disability income. The “insured benefit” – the maximum amount the insurer will pay out based on the premiums paid by the consumer – is £450 a month. He has no other accident or sickness policies – but he is entitled to receive state benefits of £3,000 a year.
His financial assessment would be:
75% of £10,000 = £7,500
deduct £3,000 = £4,500
divide by 12 = £375 per month
So the maximum potential entitlement is £375 a month – which is the actual benefit Mr A will receive.
Mr B is an employed office worker earning £20,000 a year. His policy also provides 75% of his pre-disability income with an insured benefit of £450 a month. He has no other accident or sickness policies – but he is entitled to receive state benefits of £3,000 a year.
His financial assessment would be:
75% of £20,000 = £15,000
deduct £3,000 = £12,000
divide by 12 = £1,000 per month
So the maximum potential entitlement is £1000 per month – but the actual benefit Mr B will receive is £450 per month.
Mr A might be disappointed because although his policy had an insured benefit of £450 per month, he was only paid £375. But he is not able to receive more than 75% of his earnings (less other benefits) – regardless of the monthly insured benefit he chose.
In a situation like this, the consumer might complain about the advice they were given when the policy was sold – which may have caused them to be “over-insured”.
Mr B could also be disappointed – because he did not receive the maximum entitlement of £1000. But he would have had to purchase an insured benefit of more than £450 a month to receive any more than that.
In this case, we might need to consider how the policy was sold and whether the consumer was “under-insured”.
Income protection insurance policies will contain an explanation of what is meant by “pre-disability earnings” and the period over which they are assessed and averaged. This explanation usually differentiates between “employed” and “self-employed” earnings:
The status of benefits in kind, bonus, commission, drawings and dividend payments can vary – so we will check the policy wording carefully.
If we are unsure about whether the consumer is (or has been) receiving these types of income, we will ask them for clarification. Continuing income (money that the consumer is still receiving) might also be deducted – even if it results in no benefit being payable. But we will check that the situation was made clear to the consumer when they bought the policy.
A self-employed consumer’s income is based on their net profit rather than turnover because it needs to take account of expenses they have in running their business. In most cases, their earnings will be assessed on the basis of the previous 12 months – which usually results in a reasonable result.
But there are some cases – for example, where we know from medical evidence that the consumer's condition became progressively worse and they struggled to continue working – where the 12-month average does not reflect the consumer's income when they were in good health.
An unreasonable result could also arise if a consumer's income fluctuates. For example, a consumer whose earnings depend on commission might earn less during an economic downturn. So their average income in the 12 months before they became disabled may not reflect the income they would receive over a normal economic cycle.
In these situations, we may suggest a fair and reasonable approach of taking an average of the consumer's earnings over another period – for example, three years.
Policies with an "own occupation" provision often have clauses which allow for a reduced benefit to be paid when the consumer returns to work after a period of “total disability” – and can show that their earnings have reduced.
Generally, "proportionate" benefit applies to consumers who take up a new, lower-paid occupation. "Rehabilitation" benefit applies to consumers who return to their own occupation but in a reduced capacity.
If a consumer complains to us about how the business has calculated the benefit, we will consider the policy wording. These benefits are sometimes limited to a period of one or two years.
A consumer is not usually entitled to receive either proportionate or rehabilitation benefit unless they have been "disabled" for a period longer than the "deferred" period.
However, in cases where a consumer's ability to carry out their occupation is clearly limited by their “disability” but they have attempted to continue working as best they can, insurers sometimes agree to pay the partial benefit – even though the consumer was never "totally disabled". This is considered good practice in the insurance sector – otherwise, a hard-working consumer could be treated unfairly.
If a consumer does not return to work when the insurer thinks they are able to do so – in a different role or reduced capacity – then it will generally not pay out either proportionate or rehabilitation benefit.
But in some cases, this would be an unreasonable outcome: for example, if a consumer’s business had failed, they could not work part-time in their own occupation and their disability might prevent them working in a similar occupation. In these circumstances, we might decide it is reasonable for the insurer to pay part of the benefit.
issue 52 of ombudsman news explains about our approach to assessing the amount of benefit due under a claim (including case studies).
Consumers sometimes tell us that the policy in question was unsuitable for them at the time it was sold. In these cases, we consider the advice the consumer was given – even if the complaint does not specifically refer to this.
We will first check the status of the adviser – to see whether they are an independent financial adviser or a representative of the insurer. This is so we can decide if the complaint is covered by our service and which business is responsible for the advice.
Complaints relating to advice usually involve:
A consumer might say that they were unaware of the policy’s “limitation of benefit” clause – or that it was not properly explained to them by the adviser when the policy was sold.
Limitation of benefit clauses can differ from policy to policy – and they are significant because they affect the total benefit payable. So we would check that the limitation clause was properly explained at the time of sale.
If we feel that this clause was not properly explained – and that the consumer suffered a loss as a result – we generally tell the business to put the consumer in the position they would be in if the options had been correctly explained at the outset.
Because of the way limitation of benefit clauses operate, a consumer might end up “over-insured”. This might happen if their earnings decreased, for example.
In these cases, we will consider whether the consumer was over-insured when the policy was sold. At that point, it would not be reasonable to expect the adviser to anticipate every possible change in the consumer's future circumstances. But we will look for evidence that a change in the consumer’s financial position was foreseeable – and if it was, that the adviser took this into account when discussing the appropriate level of cover.
If we think that the limitation of benefit clause was not sufficiently brought to the consumer’s attention when the policy was sold, we might tell the business to refund any overpayment of premiums – with interest – from the date the consumer's circumstances changed.
But to uphold a complaint, we would need to be satisfied that the consumer had been “prejudiced” (would have acted differently) if the clause had been properly explained – for example, by deciding to reduce cover in line with their reduced level of earnings.
When a consumer complains that a policy is unsuitable – and that they have been under-insured – we need to consider whether the level of benefit the adviser recommended was in line with the consumer's earnings when the policy was sold.
A consumer may have recently started a new business – making it difficult to establish the correct level of benefit required. Because the ongoing success of a business is not certain while it is still expanding, it would not be appropriate for an adviser to base its recommendation on projections of future profit.
Similarly, “indexation” of benefit – where benefit increases in line with an inflationary index, usually the Retail Price Index – is generally more appropriate for employed consumers where it is recognised that their level of earnings will increase.
If an adviser had recommended indexation for a self-employed consumer with a well-established business, we would consider whether the adviser had taken into account possible fluctuations in earnings, and how far the calculations reflected the actual net profit.
We also see cases where the consumer says they thought that their policy provided “own occupation” cover when in fact it was "any occupation whatsoever".
To decide these cases, we need to establish why "own occupation" cover was not offered. It might have been:
We will consider whether the consumer was aware of the level of cover they were purchasing. If we think it is likely they were, we are unlikely to uphold the complaint.
On the other hand, if we decide that the consumer was unaware of the level of cover – or that the advice was unsuitable – then we generally tell the business to refund the premiums the consumer has paid with interest at our usual rate of 8% simple per year.
We will also consider whether the consumer could have purchased suitable cover elsewhere – and whether they would have taken that cover out. If we think this is likely, we will take this into account when recommending redress.
Although most income protection policies are “pure” insurance contracts, some have an investment element. With these policies, the consumer may be offered a lump sum known as a “surrender value” when the policy expires. The amount will depend on investment conditions and the claims the business is dealing with.
When a consumer does not receive as much money back as they expect when the policy expires – or any at all – they may be disappointed and make a complaint. The insurer might also have to ask for an increase in premiums during the term to maintain the policy's benefits.
We will look at the pre-sale documentation – such as the fact find – to establish the consumer's main priority at the point of sale and the policy's suitability.
If we think the evidence shows that the consumer wanted a savings vehicle, we may say that the income protection policy was not a suitable product for their needs. But if we think income protection was the primary need, then we may decide that the policy was suitable.
We will also consider whether the financial business misrepresented the product and persuaded the consumer to choose this policy over other – maybe cheaper – options offered by other businesses.
To do this, we will examine pre-sale policy literature such as the key features document. We will also consider any report from the adviser, if this is available. Where we are satisfied that the policy was unsuitable or was misrepresented, we may tell the business to refund the premiums.
But before recommending this, we will check that the consumer had not made any claims under the policy – because it is possible that a refund of premiums (with interest) might actually amount to less than the consumer had already received under the policy.
In this case, a refund would not be appropriate. A refund of premiums is intended to put the consumer in the position they would be in if they had not received the bad advice and taken out the policy – in which case they would not have been able to make a claim under it.
As well as income protection insurance, a consumer may also have taken out other, similar insurance policies – for example, a PPI policy paying a monthly benefit or covering the monthly repayment of a loan or mortgage if the consumer is unable to work.
Some income protection insurance policies have a clause allowing the business to deduct from the benefit any money the consumer is receiving from these similar insurances. A consumer might complain that this is unfair – particularly if they took out the PPI to cover their loan or mortgage repayments, rather than to provide a replacement income.
When we consider these cases, we generally interpret the term “similar” to mean other income protection insurance. So if the policy does not specifically refer to PPI or mortgage protection insurance, then we are likely to say the business should not deduct from the benefit any payments the consumer is receiving from these insurances.
If we find the consumer has duplicate cover in place, this may indicate there are issues around how the policy was sold. We would check that the seller of the income protection cover pointed out to the consumer the risk of deductions being made because of their insurance.
If we agree that the consumer was aware of this risk, then we are likely to say the deduction can be made – unless we decide that the clause is inherently unfair.
In cases where the sale of income protection insurance (or PPI) was advised, we consider whether the intermediary or the insurer assessed what effect the sale of the policy would have on the consumer’s existing insurance. For non-advised sales, we would look at whether the product documentation highlighted this.
If the newer cover duplicated the cover under an existing policy, the consumer may have a separate complaint against the seller.
If we decide that the business should have accepted the consumer’s claim, we are likely to ask it to backdate the claim from the date the deferred period ended to the present date, adding interest at our normal rate of 8% simple per year on each benefit payment that should have been made from the due date of each payment until the date of settlement.
There is more information about our approach to compensation for being deprived of money and financial loss in our online technical resource.
Consumers sometimes think that once their complaint has been resolved, the policy will continue to pay out indefinitely. But the business can choose to review the claim – specifically, the consumer's level of disability – at regular intervals.
When recommending compensation, we tell the insurer to pay the claim to the present date. But the effect is that the business should continue paying the benefit until it can demonstrate that the consumer no longer meets the policy’s definition of disability. In practice, businesses are likely to continue to pay at least until the next review of the claim.
We can only award a maximum of £150,000 (£100,000 for complaints we received before 1 January 2012) – so although we can recommend that the business pay more than this, the total amount of benefit arrears we can make the insurer pay can’t be more than this. There is more information about this in our consumer factsheet on compensation over £150,000.
The award we make relates only to the complaint the consumer has referred to us – that is, to any benefit they are owed because the insurer rejected or terminated that particular claim. So if the consumer accepts our decision, the insurer should not treat them any differently if they go on to make another claim under the policy.
If we decide that the insurer should not have stopped paying the benefits, we will tell it to reinstate the claim – bringing it up to date – again with interest.
Many income protection policies contain a "waiver of premium" or "premium protection" clause – which means a consumer would not have to pay further premium payments while they were receiving benefits. So we may also tell the insurer to refund (with interest) any premiums the consumer has paid that should have been “waived”.
If we conclude that the policy was mis-sold, our general approach is to put the consumer in the position they would be in if business had not made the error.
In many cases, we decide that the consumer would not have bought the policy if they had been correctly advised. So telling the business to treat the policy as if it were cancelled and to return the premiums (with interest) is enough to ensure the consumer is not out of pocket.
In other cases, we may conclude that even though there was something wrong with the advice, the consumer would probably have purchased the policy anyway – so they have not lost any money.
If we think the cover had an unusual and/or a significant restriction that was not properly explained to the consumer, we may tell the business to meet the claim in full – if the consumer could have bought an alternative policy without this restriction at the time the policy was sold.
More information about our general approach to complaints involving mis-selling of insurance policies is available in our online technical resource.
Where we are satisfied that the business has made an error, we also consider whether the consumer should receive compensation for any distress and inconvenience they may have experienced as a result.
To reach a decision about this, we will consider how reasonable the business’s original decision about the claim was. We will also look at other factors, such as whether the business delayed the claim. We will bear in mind that in cases involving mental or physical ill-health, consumers may experience greater distress or inconvenience.
More information about our approach to compensation for non-financial loss-compensation for trouble and upset is available in our online technical resource.
contact our technical advice desk on 020 7964 1400
contact our technical advice desk on 020 7964 1400