Critical Illness Cover

[rdm2006]

I was sold Critical Illness Cover by HSBC on my mortgage. the cover being that if i became critically ill/perminantly disabled my mortgage would be paid off. I assume that this would come under the same roof as PPI and have began a claim for its refund as i was not fully informed about this policy and was led to believe that it was essential in taking out my mortgage.

I have sent the first letter and will let you know what happens.

Also with a different company i had one of those (pay up front) ppi's and have made a successful illness claim on it but it is obviously more expensive than it needs to be can i claim this back as i was led to beleive no insurance no loan ?

[hedgey06]

Originally Posted by rdm2006

Also with a different company i had one of those (pay up front) ppi's and have made a successful illness claim on it but it is obviously more expensive than it needs to be can i claim this back as i was led to beleive no insurance no loan ?

Hi rdm,

Sorry that you haven't had an answer to the above yet. PPI definitely isn't my area of expertise but hopefully somebody will be able to answer the above for you.

Best of luck with the claim

[loukim]

Did or have you got a copy of your Demands & Needs ?
What year did you start theses PPI'S ?
Have you got a copy of your T&C ?
Was the statutory cancellation period ever explained to you ?
Are you in full time employment or working min of 16 hours a week ?
Was you ever told the PPI'S are optional ?
Was you ever asked if yoy had any other insurance that would provide cover?
Was you ever explained that these are single premium's product and that interest would be added to the price of the premium ?
was the loan sold over the phone, if so have they got a recording ?
Did they give you a price with and with out PPI ?

Have a look at my thread, these are all question i asked.

Good Luck .....
i'm not of any way a trained adviser but would be willing to advice you from what i learnt from my own claim.

[rdm2006]

Sorry i have not replied sooner

Re critical illness cover, I have 2 policies one taken out in 1995 the other in 2002. (knew nothing about the 1995 one untill i disputed the 2002 one) However they were both completely needless as my employer at that time provided free insurance (either by direct employment or via pension scheme not sure which) cover of £55,000 upon my death when my mortgage was only about £35 - 45,000 so it was more than sufficient to cover my mortgage plus my surviving partner (she who must be obeyed) would receive at least half of my pension (more in the first few years if i remember correctly)

Had a letter saying they will deal with it in about 4 weeks poss 8 weeks. I will let you know what happens.

With regards to the standard PPI i have already claimed for a period of sickness so i will just cancel that one.

[rdm2006]

Rang the bank today to ask what is happening, they say still dealing and that they have 4 more weeks to reply as i did not email them until the 31st Jan. I advised them that i had sent an email to a person on the 17th Jan and that it was not my fault that he chose to ignore it. They say that doesn't matter as they got it on 31st that is when it goes from.

So i rang FOS and they are going to write to them on my behalf to say that complaint was made on 17th Jan not 31st and that they have only 2 more weeks to deal .

[remorse]

Hi RDM,

Can I just clarify that PPI and Critical Illness policies are 2 different types of policies. I appreciate that the Critical Illness policy may have been misold but I would just like to clarify.

A critical illness policy is a lump sum assurance policy whereas PPI is a insurance benefit payment. In essence, a critical illness policy is established to pay out a lump sum on diagnosis of a 'critical' illness whereas PPI pays out the monthly benefit to cover a specific credit deal ie, loan. PPI normally also pays out on redundancy where as critical illness does not.

You mention that your employer provides death in service which again is a different pay out compared to the Critical Illness policy.

Hope this helps.

D x

[rdm2006]

That depends on your viewpoint. Personally i would say it is still a form of PPI i.e. it covers you for illness. unlike normal PPI it does not pay regular monthly amounts or pay you for unemployment (does this make it even less beneficial?). I Know that my employers policy is different, however, since this would have "paid off" my mortgage (and then some) how can they justify (amongst the other reasons for mis-selling) that it was in my best interest.
The reason "this will pay off your mortgage and leave your wife and children secure and mortgage free" just does not cut it, as my other pay out would have done that and still left money to spare. Looking back, As i had a 1year old child at that time it would have been more "in my best interest" to start a college fund with that money and had they advised this i would not be complaining today.

I just believe that this was not the best they could have done for me but it was the best they could do for their profit margins.

Edit: just read that back and thought it may sound a little offensive - it is not meant to be .

[remorse]

Originally Posted by rdm2006

Edit: just read that back and thought it may sound a little offensive - it is not meant to be .

No worries.

PPI and CIC are 2 different policies although I do accept what you are saying about them being the same(ish).

I am not in an informed position so couldn't say whether this policy has been missold but I would say that from the point of view of knowing the CIC policies that there are some very good ones out there (there are equally some really awful ones) and as it is designed to provide a lump sum on diagnosis of a CI it can be more beneficial than PPI especially as you can decide where the benefit is utilised - ie, it doesn't have to be utilised to pay off a debt - you could have the most fantastic holiday

Keep us informed of how your complaint goes as, I agree, like PPI some may have been sold as being a necessity of a mortgage offer which I would disagree with.

Take Care.

D x

[zander]

Originally Posted by rdm2006

That depends on your viewpoint. Personally i would say it is still a form of PPI i.e. it covers you for illness. unlike normal PPI it does not pay regular monthly amounts or pay you for unemployment (does this make it even less beneficial?). I Know that my employers policy is different, however, since this would have "paid off" my mortgage (and then some) how can they justify (amongst the other reasons for mis-selling) that it was in my best interest.
The reason "this will pay off your mortgage and leave your wife and children secure and mortgage free" just does not cut it, as my other pay out would have done that and still left money to spare. Looking back, As i had a 1year old child at that time it would have been more "in my best interest" to start a college fund with that money and had they advised this i would not be complaining today.

I just believe that this was not the best they could have done for me but it was the best they could do for their profit margins.

Edit: just read that back and thought it may sound a little offensive - it is not meant to be .

Unfortunately, critical illness has had bad press when it is unjustified. As the chances of contracting a critical illness are one in four for men and one in five for women, it's a vital protection policy; ie we are more likley to contract an illness than die. Regarding the amount of cover you have in place, there should always be enough to clear the mortgage and a minimum of 3x salary. The protection prevents hardship and social security (if unable to work again, means tested benefit. No one can survive on£70 a week) If you have Death in Service with your employer, what happens if you change jobs or lose your job?
You should have received a "reasons why" letter from the bank which is documented evidence of the advice process.

[rdm2006]

Originally Posted by zander

You should have received a "reasons why" letter from the bank which is documented evidence of the advice process.

No Didnt have anything like that as far as i know and if i changed jobs it would become "usefull " from the date of the change (providing my new employers didnt have a similar "employee benefit") but would not alter the fact that way back in 1995 when i was "pushed into having it" it was not in my best interest.

To be honest i do not think that its bad press is unjustified. People have been duped into buying this without checking if it is really needed and if watchdog, this site and other sites like it, are anything to go by then they just turn people down when they try to make a claim on it, but that is another debate which i will not get into here.

[zander]

Originally Posted by rdm2006

No Didnt have anything like that as far as i know and if i changed jobs it would become "usefull " from the date of the change (providing my new employers didnt have a similar "employee benefit") but would not alter the fact that way back in 1995 when i was "pushed into having it" it was not in my best interest.

To be honest i do not think that its bad press is unjustified. People have been duped into buying this without checking if it is really needed and if watchdog, this site and other sites like it, are anything to go by then they just turn people down when they try to make a claim on it, but that is another debate which i will not get into here.

The reason for bad press (media getting a sniff of a scare story without the facts) is because in 95% of cases which have not paid out is down to non disclosure of material facts. If, when purchased, the "adviser" did not follow the sales process compliantly, he or she and the company involved are leaving themselves wide open to the compensation culture and fines from the FSA. New guidelines set down by the ABI are now being followed by the majority of protection firms meaning that a pay out will happen on non disclosure as long as it is not connected to the illness that was not disclosed. That will be on a reduced amount as the monthly premium would have been more had disclosure happened in the first place.

[rdm2006]

Received a letter today and big surprise
Their view in black and what i will be sending to the ombudsman in blue

Further to my letter dated XXX 2008, I have now completed my investigation into the issues you raised.

To begin with may I say how sorry I am that you have felt it necessary to complain about your Mortgage Protection Plans with Critical Illness Cover. In addition, please accept my apologies for the delay in providing this response.

There is no Mortgage Protection Plan (MPP) with Critical Illness Cover (CIC). I have recently discovered that the MPP is a stand-alone policy and the two CIC’s are separate items. There is no dispute over the MPP. Any attempt to say that these were one policy is an attempt to deceive you into believing that it was necessary. I did not discover that the 1995 policy even existed until I rang to obtain the number for the 2002 policy.

Your concerns as I understand them are that:

•You were not given correct information when the policies were sold to you as the sales person stated or implied that taking out the policies would assist your mortgage application.

•The salesperson was very pushy in selling you the policies so you felt you could not say no.

•The salesperson stated or implied that taking out the policies was essential.

•The salesperson did not give you full information on what the policies would or would not cover.

•At the time the policies were sold you had life cover of £55,000 provided by your employer which would have more than covered your mortgage therefore you believe that the policies were neither required nor were they sold in your best interest.

Having taken the opportunity to review the records we hold in relation to this matter, I regret that I am unable to support your complaint and therefore cannot agree to the refund of premiums that you requested.

Our records show that in xxx 2002 you met with Ms X, Financial Planning Manager, to discuss your financial planning requirements. To enable Ms X to identify and prioritise your financial needs a Confidential Questionnaire was completed. This document confirmed that you needed to protect the equity release loan that you were arranging at that time against your death or diagnosis with a Critical Illness.

Why Have I not received a copy of this Questionnaire? If this document confirms that I needed cover, why do they later say that my Ex Employers cover could have been an option? If it could have been an option then surely it would have been in my best interest to use this and use the money paid into the CIC to start a college fund for my one year old child.


On the basis of your financial need, Ms X recommended that you take up a Mortgage Protection Plan with Critical Illness Cover with a term of 18 years and a sum assured of £X,XXX to match your equity release loan.

This is not one policy, it is three policies. Ms X did not recommend this; she said that we needed it as per the questionnaire.


A Mortgage Protection Plan with Critical Illness Cover is designed to pay a lump sum, the sum assured, should you die or become diagnosed with a specified critical illness during the term. The level of cover chosen reduces over a fixed period of time and is suited to cover borrowing where the outstanding balance also reduces over the designated term. The amount payable is equivalent to the balance outstanding on a capital repayment loan with an assumed interest rate of 10% being applied. At the end of the term or following a valid claim the policy will cease with no value.

This describes the CIC and describes nothing of the MPP, which only proves the banks deception.

In 1995 and 2002 when your policies commenced, it was our standard procedure to provide you with a Product Brochure and Key Features Document which provided a full explanation of how the products worked, including what they would and would not cover.

These would have been received at the same time as receiving all other information regarding to the mortgage and we would have been overwhelmed with literature.

I regret to say that I have not been able to find any evidence to suggest that on either occasion you were told that taking out the policies would assist your mortgage application or that taking out the policies was essential. At the time that your first policy was taken out, it was HSBC's usual practice to make it a condition of any secured lending that a suitable life policy with an approved insurer had be taken out for at least the amount of the lending. The policy did not however have to be arranged through HSBC and the addition of Critical Illness Cover was completely optional.

This is a contradiction in terms, they say that we were not forced to take out such a policy and then say that it was HSBC’s practice to make it a condition that a policy existed. Why was it needed? I already had sufficient cover and HSBC had a First Charge on the property to protect their interests in it.

At the time that your second policy was arranged it was no longer HSBC's usual practice to add such a condition to mortgage lending. I have enclosed a copy of the Equity Release Loan Agreement relating to the second policy which confirms that the only security asked for by HSBC was a first charge on your property and the only special terms were that the loan was subject to acceptable searches and enquiries and also the receipt of a satisfactory valuation report.

This agreement is not a transcript of the interview and does not cover what was or was not said during the interview and confirms what was signed for and not anything that was said to lead us into signing it.


You mentioned that the Financial Planning Managers you met with were very pushy in selling you the policies. Our Financial Planning Managers are trained to be sensitive to the needs of our clients and I regret that on this occasion you were dissatisfied with the manner in which the recommendations were made to you.

FPM’s may be trained this way, however, they are driven by commission and targets which, is not mentioned here. What were her targets and commission levels?

In addition, after your applications were processed you were sent cancellation notices that confirmed your right to cancel the investment policies within the period notified. You then had time in which to raise any queries you may have had with the products or to change your mind and not proceed with them.

Again, we would have been deluged with information and too much for any layman to digest fully.

You also said that you had £55,000 in life cover provided by your employer, Ex-Employer, at the time these policies were arranged, which would have easily covered your mortgage. Whilst using this benefit to protect your mortgage could have been an option, HSBC would not normally recommend this, as there was no guarantee that you would have had the benefit available to you if you had died at any time during the mortgage term. You did confirm that you left employment with Ex-Employer in 2004, well before either loan was due to be repaid.

They state that this cover could have been an option but they would not normally recommend this. If it is sufficient to be an option then it would have been in my best interest to use it as such. Yes I left XXX in 2004 but what relevance did that have in 1995 and 2002, are they saying that in 1995 and 2002 they could foresee that I would leave XXX in 2004? How could they base my current needs in 1995 and 2002 on something that happened years later in 2004? How do they know that my next employer will not have a similar policy?

I realise that you may be disappointed with my decision but I hope that this letter has been helpful in explaining the reasons for it and that I have been able to respond to your concerns satisfactorily. However, if you have any further information that you feel is relevant then please forward it for my consideration.

They have not satisfied my request in showing how their actions were in my best interest. How does the above prove what was said or not said in the interview? I have been negligently misrepresented to and under the 1967 Misrepresentation Act the onus is on them to prove otherwise

[remorse]

Hiya,

Many thanks for posting the response. To aide your complaint with the ombudsman, can I just clarify something for you? (Please don't shoot me but if it has been mis-sold, I don't want an adjudicator throwing it out on a technicality )

The Critical Illness Cover (CIC) is a completely different policy from the life assurance cover offered by your (ex) employer. The Critical Illness policy is designed to pay out on diagnosis of a cricital illness where as the life assurance, more commonly referred to as death in service, only pays out in the event of your death during your employment. The advising of CIC policies alongside life cover policies is common practice as research shows you are more likely to suffer physical impairment than die during the term of a mortgage.

I think, reading between the lines, your complaint should refer to the following:

- the selling of an additional CIC policy when one was already in operation, why did the FPM not consider increasing the cover available.
- you were lead to believe that by taking out a CIC policy as well as the MPP, this would aide your mortgage application.
- the terms and conditions of the policy were not fully explained to you ie, HSBC are saying that you received documentation in writing but what was actually said to you about the product? Did they give examples of when it would pay out?

I hope that this is of use but if I can help in anyway, please let me know.

Kind regards

D x

[rdm2006]

thanks remorse (and dont worry i wont shoot you) at the moment my main point of concern (regardless of other reasons) is that they say that my life cover with ex-employer could have been used but did not tell me this at the time - so how can i make an "informed decision" when they withhold some of the information? Also they say that the purchase would not assist my application and in the same paragraph say that it was a condition that a life policy existed. (were not saying that you have to have it but it is a condition that you do - double dutch).

And the critical illness cover i have pays out on death or critical illness. If that helps at all.