Widow of man who took own life gets €500 insurance settlement

WizardDr

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Widow of man who took own life gets €500 insurance settlement

Firm refused to pay mortgage protection policy worth €220,000 because it lapsed four days before man’s suicide

From Irish Times today.

http://www.irishtimes.com/news/cons...-life-gets-500-insurance-settlement-1.1716630

Having briefly read the details I am beginning to conclude that based on the tracker cases that I am familiar with and this, that the FSO may be unfit for purpose. [Similar facts different results ]

These direct debit bouncing by Banks coincide with a zero tolerance on being in debit or over limit - all seemingly eeringly adopted by banks in what appears to be coordinated action. An off the wall 'clearing effects' of 5+ days when the Bank gets value on Day 2 for paper items.

Does anyone share concerns as to my lack of confidence in FSO?

Any views?
 
The company cancelled the policy after two successive payments had not been made because of insufficient funds being the couple’s account.



Ms Sweeney insisted she was unaware there was a problem and had never received any letters warning that the policy was due to lapse.



The insurance company claimed it had sent three letters to the couple and further letters to their building society informing them the policy was due to lapse.


Like Ms Sweeney, the building society said it had received no such correspondence. Registered post was not used so there was no proof the letters had been sent

How would you rule in the case WizardDr?

That life policies should remain in place whether the premium is paid or not?

Two payments had bounced, so they already had at least one month's free cover? It may have been longer as we have not seen the Ombudsman's full decision.

They say that they sent three letters notifying the policyholder that payments had been missed. We know that life companies send such letters. Why would you believe that they departed from their normal practice in this case?

This is obviously a very sad case, and it's natural to feel that the big profitable insurance company should pay out the widow even though the policy had lapsed. But you have to put the sadness aside and look at the facts of the case. They had missed two premiums. They had free insurance for a period of time. Then it lapsed.

Tough on her, but fair.
 
How would you rule in the case WizardDr?

That life policies should remain in place whether the premium is paid or not?

Two payments had bounced, so they already had at least one month's free cover? It may have been longer as we have not seen the Ombudsman's full decision.

They say that they sent three letters notifying the policyholder that payments had been missed. We know that life companies send such letters. Why would you believe that they departed from their normal practice in this case?

This is obviously a very sad case, and it's natural to feel that the big profitable insurance company should pay out the widow even though the policy had lapsed. But you have to put the sadness aside and look at the facts of the case. They had missed two premiums. They had free insurance for a period of time. Then it lapsed.

Tough on her, but fair.
The fact that the mortgage company also has no record of getting notifications of missed payments is significant.
 
The fact that the mortgage company also has no record of getting notifications of missed payments is significant.

I am not sure that it is.

I have discussed this issue with people recently and mortgage lenders don't seem to take any action when they get notified that a mortgage protection policy has lapsed.

So what happens in practice? Was the lender so well organised that they keep copies of all paper correspondence which they get? Are they kept on the borrower's file? Are they thrown in a corner to be followed up?

We know that when payments are missed, life companies write to the insured and tell them that the payment is missed. We know that they write to the mortgage lending company named on the policy. This presumably is automatic and it is unlikely not to be done due to human error.

We know that lots of people ignore correspondence especially when they are short of money.

The life company said that they sent the letters.
The borrower said she didn't receive them.

There is no way of proving either.

At the end of the day, the guy missed his premium twice for "insufficient funds". He probably received the letter but was unable to pay the policy.

This is a desperately sad case, but I really don't think that the life company is at fault here. And I don't think that they should be made pay just because it's a sad case.

Ms Sweeney said last night. “I thought the Ombudsman was supposed to help the likes of me."

He did help her. She just doesn't realise it. If she had gone to the High Court, she would have lost as well. It would have been far more traumatic and she would have big legal bills to pay.
 
I am not sure that it is.

I have discussed this issue with people recently and mortgage lenders don't seem to take any action when they get notified that a mortgage protection policy has lapsed.

So what happens in practice? Was the lender so well organised that they keep copies of all paper correspondence which they get? Are they kept on the borrower's file? Are they thrown in a corner to be followed up?

We know that when payments are missed, life companies write to the insured and tell them that the payment is missed. We know that they write to the mortgage lending company named on the policy. This presumably is automatic and it is unlikely not to be done due to human error.
I switched home insurer last year, and I had a letter from Danske some time later asking me about insurance, as the previous insurer had notified them that I hadn't renewed. I can't recall the exact timing or how long it took, but the letter had definitely gone to Danske, and they actioned it.

I had a little fight with Danske when they refused initially to let me email them a copy of the new policy. They were insisting on fax or post. I waited for them to escalate the matter to somebody more senior, who was then happy to give me her email address.
 
House insurance is different, lenders insist on being noted on the policy so the insurance company will always send a letter to the lender if it lapses.

Not all banks assigned life policies, they only insisted on there being one in place on drawdown so if it lapsed or was cancelled the insurance company wouldn't even have had to let the lender know.

If it was assigned they would advise the lender but if the customer was contacted and did nothing about it the bank usually would do nothing further either.
 
Thanks for responses.

Brendan - I think the lapsing of a policy like this is hugely significant. I am long enough in the game to know that the procedures of insurance companies on letting people know about cancellations are off the wall in relation to the potential consequences.

With all the modern communications and all the nonsense about protection and consumers that Insurance company should have been forced to send at least TWO REGISTERED LETTERS - one to the Bank who had the policy interest noted and two to the holder (and spouse) of the Policy. I think there could be a Family Home Protection Issue here.

The Bank should then be permitted to take premiums or again a REGISTERED LETTER to the mortgage holders in plain english.

So what would I do ?

I would trawl through the processes of this Insurance Company and if they are unsatisfactory I would flog the directors in public and name them.

[Only last week I have caught AIB apparently sending out letters allegedly dated 3rd January but not getting sent out until the 6th and then having 10 day demand of reply based on the 3rd and the 10 days being actual days versus working days - this is a client not me.]

From the Irish times report I get the impression that the procedures are fairly poor - but I might be wrong.

I think your reply simply is moving into the realm of not appreciating how consumers may not fully understand consequences particularly a man who later took his life.
 
The Bank should then be permitted to take premiums or again a REGISTERED LETTER to the mortgage holders in plain english.

Hi Wizard

Sorry, I don't understand what you mean by this sentence? Could you explain it in plain English please?
 
Brendan - I think the lapsing of a policy like this is hugely significant. I am long enough in the game to know that the procedures of insurance companies on letting people know about cancellations are off the wall in relation to the potential consequences.

OK, the insurance company said that they issued two letters to this customer and at least one to the mortgage lender.

Maybe they are lying. That the mortgage lender simply does not send out letters when debits bounce. We know that banks do send out such letters. There is no reason to believe that they didn't do so in this case, other than the claim of a widow in a very distressed situation.

I don't think it's necessary, but maybe the Central Bank should review these systems and maybe even test them in real life, by getting a few people to bounce their payments.



With all the modern communications and all the nonsense about protection and consumers that Insurance company should have been forced to send at least TWO REGISTERED LETTERS - one to the Bank who had the policy interest noted and two to the holder (and spouse) of the Policy. I think there could be a Family Home Protection Issue here.

This is massive overregulation. When a policy subsequently lapses and a claim is refused, the person will check that the signature on the registered letter is not theirs. Thousands of people cancel their policies every year intentionally. You want the bank to go through the massive paperwork of registering letters and putting them onto files and keeping them for years, just because of one bad case. This is a massively disproportionate response. It's up to people to pay their mortgage protection policy as the Ombudsman pointed out.



The Bank should then be permitted to take premiums or again a REGISTERED LETTER to the mortgage holders in plain english.

Don't understand this point.

I would trawl through the processes of this Insurance Company and if they are unsatisfactory I would flog the directors in public and name them.

Yes indeed, that is an entirely proportionate response. I think that the Central Bank has a register of members of the public, prepared to administer the flogging.


From the Irish times report I get the impression that the procedures are fairly poor - but I might be wrong.

Indeed you might. I am quite sure from my own experience, that the Ombudsman asks the company about its procedures. You have to remember at all times that we are hearing one side of the story. Has FLAC published the full Ombudsman's report here?

I think your reply simply is moving into the realm of not appreciating how consumers may not fully understand consequences particularly a man who later took his life.

We don't know about the husband. But his wife looks articulate and clever enough to know that if you don't pay your premium, your insurance policy lapses. Don't forget that this was lapsed due to non-payment because of insufficient funds. I would guess he knew about it and wasn't in a position to pay it.
 
"The Bank should then be permitted to take premiums or again a REGISTERED LETTER to the mortgage holders in plain English. "

As a step in the Process - apart from what the Insurance Company should do - the Bank should take the premiums (if it can) before a FINAL Registered Letter written in plain English warning of the consequences is sent by the Bank. How could it possibly be in its interest to have the policy lapse?

Also given that insurance is a legal requirement in most cases for a residential mortgage, would anybody agree that the cancellation process should be as simplistic as it appeared in this case?

I think the FSO needs to be reviewed if this is the conclusion it is coming to.

Of even more concern is that a lot of this is happening because Banks acting eeringly in similar ways, bounce routinely items even 1c into the red or over one's limit.

Some might say so what?
 
would anybody agree that the cancellation process should be as simplistic as it appeared in this case?

I would argue that it's good for consumers that way. Where I am you have to send a registered letter many months in advance in order to change car/house/phone contracts. It's a pain in the neck. And it means it's difficult to switch as you've to remember well in advance. In Ireland your insurance comes up for renewal, you simple ring a new supplier, get the best deal, do nothing with the old company, stop the DD and set up a new one.

The story posted is tragic, but insurances lapse all the time. These are two separate issues. If you don't have the money in your account then you know the insurance is not going to get paid. You then get at least two letters notifying you. People have to be responsible for the way they manage their money. I imagine there are many people who have let life and house insurance lapse as they struggle to pay other bills, it's really easy to do this as it doesn't seem like a priority when you're wondering will the gas be cut off.

I consider the letter to the bank about the insurance lapsing as a red herring in this story. It's up to the individual, no matter how bad their circumstances to ensure there is enough money in the bank to pay their insurances.

When the direct debit bounced, isn't there a charge or notification of that?

Where I do agree with you Dr.Wizard, is that if in a similar case the Ombudsman ruled for the client than that is inconsistent, but we know his office it totally inconsistent and you'd have a better chance on Bobs Worth in the Gold Cup. And if the rules about letters are not robust enough, then a direction to all institutions should be decided upon.
 
As a step in the Process - apart from what the Insurance Company should do - the Bank should take the premiums (if it can) before a FINAL Registered Letter written in plain English warning of the consequences is sent by the Bank. How could it possibly be in its interest to have the policy lapse?

Also given that insurance is a legal requirement in most cases for a residential mortgage, would anybody agree that the cancellation process should be as simplistic as it appeared in this case?

Firstly yes in the case of mortgage protection because it is required by law it is too easy to lapse. In order to lapse a contract you should have to prove a new policy is in place. However that does not solve the issue for people who can't or just don't pay their premiums.

Why should the bank take the premium. They are not a direct party to the insurance contact. That is between the client and the insurance company. The bank have no right to take the money. Even if it was brought in through legislation what if the current account is a different account to the mortage bank.

Where do you draw the line - house insurance? Bank Loan for Car Insurance? - it's all the same although on a different scale.

I've changed my house insurance 3 times ovr the last 5 years and have put the bacnks interest down each time - that still hasn't stopped them sending me a letter every year telling me my house is not insured. In that case they would have deducted premiums for no reason.
 
Sad case ,

If premium was missed for over one month , Why should insurance pay out.
If missed premia was well advised, seems like it was, Why should insurance pay out.

If above is true , the Ombudsmans time was wasted .
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I am definately not a fan of our Ombudsman and do not trust him to be fair but it appears in this case the claimant had no case.
 
If the mortgage protection policy was assigned to the lender then within the terms and conditions of the agreement the assignor agrees to pay premiums on time BUT if in default the lender may pay the premiums and can debit the persons account and charge interest.

If the policy was not assigned then the policy document clearly states that if the premium has not been paid within the period of grace then cover will end.

During the Celtic Tiger years many policies were handed to the lenders by borrowers as security but the lenders failed to seek assignment. If the lender didn't seek assignment then the lender couldn't have been notified that a premium had been missed or later that a final notice had been issued.

The widow may not have received notices of non payment of premiums if the address they put on the application form was their previous address and if they had forgotten to inform the insurer of their new address when they moved in.

In this case I'd be trying to identify an inadequacy in the system regarding the policy assignment.
 
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