ReAssure Limited · DRN-5997528

The complaint Mr C complains about how ReAssure Limited (ReAssure) sold him and later administered a reviewable whole of life policy (RWOL). What happened Mr C took out a RWOL policy in July 1992 with a firm that has since been acquired by ReAssure, as has the policy provider. ReAssure then is responsible for both how this policy was sold and administered, for ease then any reference I make to ReAssure also includes the actions of those prior firms. Mr C already had existing cover of £50,000 and was advised by ReAssure around July 1992 to increase that by a further £100,000 for a monthly premium of £26. Recently in January 2022 ReAssure wrote to him to explain that his policy could no longer sustain the £100,000 sum assured at the monthly premium of £26 he was paying. It said he would either need to increase his monthly premium to £84.89 or reduce the cover it provided to around £34,000. Mr C believed his policy was fixed for the whole of his life and wouldn’t be subject the reviews which prompted ReAssure to require amendment to his policy. Because of this he felt it had been mis-sold to him and that ReAssure breached its terms and conditions by looking to amend his policy in the way it did. ReAssure considered his complaint but didn’t agree it should be upheld. In its view the policy was suitable for him and it had also set out with sufficient clarity that both the sum assured and the premium were reviewable. As Mr C remained dissatisfied he asked our service to look into what happened. Our Investigator who reviewed the matter thought Mr C’s complaint should be upheld in part. He explained that while he thought the policy was suitable for Mr C and that ReAssure could fairly review the policy in the way it did, he didn’t think it carried out the reviews as it ought to. And if it did and had presented clear information to Mr C about the likely changed needed in the future then that likely would’ve led Mr C to have surrendered the policy with a view to take out an alternative policy elsewhere. He recommended ReAssure pay him the surrender value from the 2012 review with interest, on the basis that the policy would end. ReAssure accepted our Investigator’s view setting out it thought the compensation due was £792.89, adding a further £200 to reflect the distress and inconvenience caused to him. Mr C responded to our Investigator to explain he didn’t agree with the outcome reached. He remained of the view the policy was mis-sold to him and had he been aware of the extent of the changes his policy likely would’ve needed in the future, he would’ve asked for a full refund of premiums paid at that time. Our Investigator didn’t change his view and as Mr C asked for an Ombudsman to review his complaint, it was passed to me to decide. I issued a provisional decision as I reached a different outcome to our Investigator.

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In my provisional decision I said: “Sale of the policy When ReAssure sold him this policy it needed to ensure it was suitable for him. There is some information available about how it was sold to him but not everything that I might want to see is available. Given the passage of time since this policy was sold, around 30 years ago, it isn’t unreasonable more information isn’t available. At the time of sale Mr C was 23 years old, single but in a relationship with his now wife, didn’t have any children at the time, and had a disposable monthly income of around £370. His main reason for taking out the policy was to provide a lump sum to his family, and future family, should he pass away or suffer from a critical illness. He didn’t have any debt or need to make any provision for education, as at the time he didn’t have his children, but wanted to cover around £6,000 worth of costs to take care of his funeral and estate expenses. The adviser had assessed that in order to provide his income for life to his family he would need at least a further £98,500 of cover to what he already had in place. It's finely balance but I think the RWOL policy Mr C was advised to take was suitable for him. In my view even though at the time of sale he wasn’t yet married or had any children, the evidence during the sale about why he wanted this cover, and what he’s said since, demonstrates that having this cover was important to him. I say this because it is his consistent position that he wanted to be able to provide for his family on his passing or critical illness. Based on what he’s said I think that was the case whether at the time of his passing he’d be supporting a future spouse and children or his other family members – such as his parents and any siblings. I’ve also considered whether the policy was affordable for him which given it would cost £26 each month against his monthly disposable income of £370, I’m satisfied it was. Alternative types of life cover may also have been suitable, such as non- reviewable whole of life and term assurance. But in the circumstances I’m satisfied the RWOL policy ReAssure recommended more closely met his objectives and needs. I say this because it could provide cover for life rather than a set period of time, which appears to have been more important to Mr C, and could likely provide a higher level of cover in the earlier years, and potentially into the future, at a lower price compared to a non-reviewable whole of life policy. For those reasons, I’m satisfied ReAssure’s recommendation that Mr C take out the RWOL policy that he did was suitable. Administration of the policy The type of policy Mr C took out was, as already mentioned, a RWOL policy. These policies tend to work by using the premium to pay for life cover and to use what’s left over to build an investment pot to be drawn from when the premium can no longer sustain the cost of life cover alone, which increases with age. Over time the aim is that the investment pot grows enough to cover the additional life costs into the long term, ideally for the rest of the policyholder’s life. But when it can’t, which can occur when the cost of life cover increases above the premium, changes may be required to sustain the policy for the longer term. Reviews would be carried out at regular intervals to see how the policy is performing and where change is needed, the firm would usually recommend options such as increasing

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the premiums, reducing the level of cover provided, or surrendering the policy for its cash value. I’ve considered how the policy, including the reviewable nature, was portrayed to Mr C by ReAssure in its product literature. ReAssure has provided what it says is the terms and conditions from the time, dated November 1991. Whether it is or not the actual terms in place at the time I think it’s likely to be at least indicative of those which were in place and provided to Mr C when he was advised to take out this policy. Importantly this says at clause 13 that the policy is reviewable, explaining that ReAssure will from the tenth year, and every five years until the age of 75 when the reviews will become annual, review the investment value of the policy. If that considered against the premiums due up until the next review aren’t sufficient to cover the policy charges, which would include the costs of life cover as they increase over time, then it will likely conclude that the policy can’t sustain the sum assured. If that were to happen then the terms allow the firm to increase the premium, allow Mr C to either pay a lump sum into the policy to increase the investment value, or to reduce the sum assured instead. ReAssure has then in my view demonstrated on balance Mr C had been told the policy was reviewable, and that it had done so in a clear, fair and not misleading manner. It follows then it wouldn’t be acting unfairly by reviewing the premium it was charging Mr C once that initial 10 year period had passed. But to apply that fairly, ReAssure would’ve needed to present information about the policy in those reviews to Mr C in a clear, fair and not misleading way. I say this because in meeting the regulator’s requirements around this firms needed to ensure that they provide policyholders with sufficient information for them to be able to make an informed decision about what changes to make on his policy, and how this might affect it in the future, before it’s too late for them to do anything about it. In Mr C’s circumstances his policy was supposed to be reviewed, up until the complaint was raised, in 2002, 2007, 2012, 2017 and 2022. However, of those expected reviews only the review in 2022 went ahead, albeit later than expected. As there were no reviews prior to 2022, I can’t fairly say ReAssure provided Mr C with clear information about his policy and the potential changes that might be needed in the future at those review points. This is important as ReAssure hadn’t provided information for Mr C to be able to understand the extent future changes might be needed to sustain his policy long term. ReAssure has provided information about the costs of the life cover and the premiums he’s paid since August 2012, the furthest back it’s been able to provide. This information is useful to understand when the “tipping point” of this policy likely was, that being when the cost of the life cover exceeded the premium. ReAssure hasn’t been able to provide the costs prior to August 2012 so I can’t be sure when the tipping point was reached. But given the monthly cost of the life cover had reached £38.49 against the premium of £26 by August 2012, it’s likely in my view when considering those cost annually that the tipping point had been reached at some point between the 2007 and 2012 reviews. By the 2012 review then was an important moment in the policy as the tipping point had been reached. At that time, and potentially before, ReAssure would’ve

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reasonably been aware of that and so ought to have communicated clear warning to Mr C about the future prospects of his policy, and the extent of increases that might be needed in the future could soon become significant. Which given the life costs as they were increasing further beyond the premium Mr C was paying and the likely value of the investment pot at the time would’ve shown the policy wouldn’t be able to sustain itself for the duration Mr C was expecting. By not carrying out those reviews, providing that information or giving a clear warning, I think there was an imbalance of knowledge between ReAssure and Mr C around how significant those changes would likely be in the future to sustain the policy. Information he needed to allow him to decide whether to continue with the cover, make changes at this earliest stage or to look at alternative cover. However even if Mr C had all that information I think it’s likely he would’ve decided to maintain the premium for the level of cover that could provide. I say this because from what Mr C has said I think he would’ve still wanted cover to provide the family protection which remained a need for him, particularly so since he’d since married and had children in addition to his wider family. In my view then his options were to either pay more into the policy, surrender it for what appears to be a relatively low cash value of around £800 to seek what would likely be more expensive cover elsewhere, or to keep this policy in place which was providing a high level of cover at a relatively low cost. While the premiums or sum assured would need to change in the future, given the surrender value and premiums due it was in my view likely to last for many years still before more significant change was required, as has only come to light recently. ReAssure’s comments that the 2020 review passing was indicative that the earlier reviews wouldn’t have failed persuades me the sum assured would likely have remained at £100,000 until the 2022 review when it couldn’t anymore. I also don’t think paying a lump sum into the policy would’ve been attractive to him where that would’ve been expensive and the impact would likely be no more than a relatively short extension. It follows then given the policy was still likely to provide a high level of cover at a low cost for a long time still, I think it most likely Mr C would’ve decided the best option from the limited choices available to him would’ve been to retain the policy. For similar reasons, I don’t think the 2017 review would’ve led to a different decision. ReAssure has since offered £200 to reflect the shock and surprise caused to Mr C when it said his policy needed to change as significantly as it did. I think that offer is fair where those feelings only came about from ReAssure not providing reviews previously that would’ve alerted Mr C to the likely future changes required much earlier than he actually experienced. As I would’ve directed it to pay £200 to compensate him for that if it hadn’t offered to, I intend to direct ReAssure to pay that £200 compensation, if it hasn’t already.

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For the reasons given above while I acknowledge my decision will be disappointing for Mr C, I won’t be upholding his complaint, outside of directing ReAssure to pay the £200 compensation for the upset caused, about the changes to his policy or how it was sold to him.” ReAssure accepted my provisional decision, Mr C didn’t. He explained he found my outcome unsatisfactory given the sudden and expected changes he experienced with his policy. He reiterated had he known about the changes he’d need to make this policy earlier he would’ve changed to another policy that would’ve been more affordable and comprehensive, and remained of the view the policy should be cancelled and his premiums refunded to him. The complaint has now been passed back to me to continue. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’ve reviewed this matter again, including the comments Mr C made in response to my provisional decision. I had already explained in my provisional decision why I didn’t think alternative cover was likely an option available to him. To be clear, my view on this is that his policy had a low surrender value and with alternative comparative cover unlikely to have been available at a lower price, given the cost of this cover increases with age, I’m not persuaded Mr C would’ve cancelled the policy and obtained cover elsewhere. And as I said in my provisional decision, I think he still had a need for this cover and so with the options available to him, he likely would’ve kept the policy and not have made any different decisions around it that he actually did. It follows then I’ve not seen to depart from the conclusions in my provisional decision. I direct ReAssure Limited then to pay Mr C £200 for the reasons given in my provisional decision. My final decision For the reasons given above my final decision is that Mr C’s complaint is upheld and I direct ReAssure Limited to settle the complaint as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr C to accept or reject my decision before 2 January 2026. Ken Roberts Ombudsman

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