Aviva Life & Pensions UK Limited · DRN-4045144

The complaint Mr and Mrs T complain they were mis-sold a reviewable whole of life policy by Aviva Life & Pensions UK Limited (originally General Accident). They are unhappy, following a policy review in 2020, they were required to substantially increase the premiums, and don’t think the policy has been administered correctly. What happened In 1995, Mr and Mrs T received advice from a representative of General Accident (now part of Aviva) to take out a whole of life policy with critical illness cover. The policy was taken out to cover their mortgage. It had an initial sum assured of £43,421 and a premium of £22.39 per month. An increasing premium benefit was included, meaning the premiums and sum assured increased over the first four years (by 1999 the cover was £57,787 and premiums were £27.22 per month). The policy was reviewable, which meant that if the performance of the policy wasn’t at the required level, adjustments would be needed to be made to the premium and/or sum assured. The first review took place in 2005. The review letter sent to Mr and Mrs T confirmed that no changes were needed, and Aviva said it would be able to guarantee life cover at the current level until the next policy review. The policy was due for reviews in 2010 and 2015. But Aviva has accepted it failed to carry out these reviews. The premium and sum assured stayed the same. In July 2020, Mr and Mrs T were sent the next review letter. This explained the outcome of the review was that Aviva could no longer guarantee the current benefit amount until the next review date. It gave Mr and Mrs T the option to increase their premium to £94.78 to maintain the level of cover or reduce the cover to £18,278.01 whilst keeping the premium unchanged. They agreed to increase the premium. Shortly after this, Mr and Mrs T made a complaint about the sale and administration of the policy. Aviva responded separately. In respect of the mis-sale complaint, it didn’t uphold it and said the policy was suitable at the time of sale. In summary it said: • The advisor recommended the policy in order to protect their new mortgage against death and critical illness. It was explained that the plan was set up on a maximum cover basis and that the premiums were guaranteed until the tenth anniversary when the plan would be reviewed. • They were given a Key Features Document (KFD), which explained how the plan worked including its aims and the risks involved. The 2010 and 2015 reviews were missed, but it calculated these reviews would have passed. The 2020 review showed the policy was not on target and there would not be sufficient funds in the plan to reach the next review. • When the policy was taken out, the adviser would not have any indication of what the outcome of the reviews would have been. All he was able to confirm was that the

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premium was only guaranteed until the first review. In respect of the administration complaint, it set out the history of the policy reviews. It acknowledged Mr and Mrs T’s unhappiness with the outcome of the 2020 review, but said it was unable to waive the reduction in benefits or increase in premiums. It apologised for the missed reviews in 2010 and 2015 and admitted this was its mistake. It offered Mr and Mrs T £300 in compensation for the inconvenience this caused. Mr and Mrs T didn’t accept these responses and referred their complaint to this service for an independent review. One of our investigators looked into the complaint. In summary they said: • The policy was a reasonable recommendation for Mr and Mr T’s needs at the time of sale. They were given information regarding the reviews and the possibilities for the future of the policy. • In respect of the reviews, to meet its regulatory obligations, Aviva had to ensure the review communications paid due regard to the information needs of clients and communicated information to them in a way which is clear, fair and not misleading; and have paid due regard to the interests of their customers and treated them fairly. • The 2005 review letter was sent, but only gave information about the next five years, not the life and overall purpose of the policy. And the 2010 and 2015 reviews weren’t completed. Aviva ought reasonably to have known changes would have to be made to the premiums or cover level as Mr and Mrs T got older and those changes were likely to be very significant. And based on the information available it ought reasonably to have known this by the time of the 2015 review. • The investigator considered what Mr and Mrs T would have done if they had been given clear information sooner. They found it unlikely they would have done anything differently even if better communication. The policy was clearly important to them, so unlikely they would have stopped it at any point in the past. • The compensation offered by Aviva for the missed reviews was fair in the circumstances. Mr and Mrs T didn’t agree, so the complaint has been referred to me to reach a decision. In summary they said: • At the point of sale, it was recommended that the whole of life policy was the suitable product. They didn't select that policy, it was suggested due to their age, the small- scale premium, the whole of life cover which came with critical illness, which was incredibly reassuring. • They have maintained the cover as they are some way away from their state pension age and being able to draw down pension benefits. They agreed to continue with this cover at the current cost and benefit, but this will be under review going forward, and it is not a given that they will pay to keep the policy no matter what the cost and will depend on their financial position at future reviews. • The lack of warning, the lack of alternatives, the imbalance of knowledge and that the policy works in five-year chunks rather than considering the whole of life shows the lack of regard for their situation. This policy was sold as 'whole of life' and whole of life should be what it means, not moving the goal posts after 25 years. • Aviva has failed in its responsibility to moderate its own policy by not implementing reviews in 2010 and 2015 and this is wholly unacceptable. This is a regulated responsibility and Aviva have failed to carry this out and due regard should be paid to this and its overall suitability as a policy over the longer term. • The policy documentation details that premium increases are based on the Retail

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Price Index. So how can the policy commence at £24.69, remain at £27.22 for 25 years and then subsequently increase to £94.78. This loose definition of how premiums increase doesn't really provide the explanation that is required. Since the complaint was referred for decision, a further policy review was carried out in in 2025. The outcome of the review was that it passed, and Aviva confirmed it could guarantee the current benefit level (£52,787.01) until the next review in 2030. Our investigator also discussed the possibility of reconstructing the policy from the 2015 review by establishing with Aviva what the premium would have been if it was calculated on a whole of life assumption at this time. This indicated that the premium would have increased to around £111 per month. Mr and Mrs T were given the option of accepting this reconstruction and paying the increased premium going forward. After consideration they decided, they didn’t want to accept this level of financial commitment. As no agreement could be reached the complaint has been passed to me to make a decision. 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. Mis-sale I’ve first considered Mr and Mrs T’s concerns about the sale of the policy. They have been clear they were led to believe the policy would provide them with the cover for life and weren’t expecting the changes they have experienced in the more recently. The policy was taken out following advice received from a representative of General Accident (who Aviva are now responsible for). There is limited evidence from the time of sale, but I have reviewed the documents available - including the recommendation letter and the ‘Key Features of Lifetrack’ document Mr and Mrs T retained. I’ve also considered Mr and Mrs T’s testimony about the reasons why they took out the cover, and their understanding of the benefits it would provide. They have confirmed they wanted cover for the whole of their life, and this was the basis it was sold for and not to drastically reduce after 25 years. Firstly, I’ve looked at whether the policy was suitable for them at the time it was sold. The suitability letter indicates Mr and Mrs T were taking out a mortgage over 25 years and the policy benefit was sufficient to cover this. It was taken on a joint basis so provided cover for both of them, paying out on first claim. There is a warning that the policy is reviewable and the first review was after 10 years, and the importance that regular reviews are carried out so that the necessary cover can be maintained. Affordability is discussed in terms of the overall mortgage package, and it is confirmed that they had sufficient set aside to cover the mortgage and associated insurance policies. In their complaint submissions Mr and Mrs T provided details of their circumstances and needs at the time. They confirmed the reason for taking the policy was to provide cover in the event of death and on diagnosis of a critical illness. They were looking for whole of life cover rather than cover through a term assurance (which would only last for a specified term). I haven’t been provided with much detail about their income and outgoings at the time, but I haven’t seen anything to suggest the premium was unaffordable and it has been maintained.

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Having considered the available evidence, I’m satisfied the policy was a suitable recommendation to meet Mr and Mrs T’s needs and aims at the time. But I note Mr and Mrs T think the policy was mis-sold because they say they weren’t told that the policy premium could change to extent they discovered at the 2020 review. But there is some evidence to suggest that information about potential changes was given to Mr and Mrs T as part of the advice process. I note the KFD explains the risk factors of the policy – including that you may need to increase premiums to maintain the level of cover. It also explains the policy will be reviewed at regular intervals to see whether the combination of cover and premiums you have chosen can be maintained, and the cover is guaranteed until the first policy review. Conversely, I haven’t seen anything that would indicate the premium and sum assured were guaranteed to stay the same for the whole of the life of the policy. I understand Mr and Mrs T don’t recall being made aware of the possibility of the type of changes that would be required. But I don’t think the balance of evidence supports that they were given misleading information about the possibility of reviews or that any guarantees were given about the level of cover. It wouldn’t be possible at the time of sale to predict exactly when reviews would require changes, or the extent of what would be needed. So in conclusion, I haven’t found that the policy was mis-sold to Mr and Mrs T. I understand they are disappointed that the policy hasn’t performed as they expected but I haven’t seen this is as a result of a failing in the sales process. Administration I acknowledge Mr and Mrs T didn’t expect to see their premiums increase and were shocked when they received the review letter in 2020 asking them to nearly quadruple the premium. As noted above, the policy documentation does explain the possibility of reviews. Looking at the available evidence, in my view, it is clear from the outset that this is a reviewable policy, and premiums may need to be increased. I’ve not been persuaded there is evidence to say the premiums and sum assured were guaranteed not to change, or there was a limit to possible changes. This is supported by the information given in the policy reviews to show that the premium is reviewable. So I’m satisfied the policy can be subject to change and therefore I don’t think that Aviva has acted unfairly when it reviewed the policy and proposed the changes it did. It may be helpful if I explain how these types of policies broadly work in practice. The cost of providing cover isn’t fixed and instead increases over time as the lives assured get older. At the outset, when charges are relatively low, the difference between the premiums being paid and the charges results in an investment pot being built up. Over time, businesses will undertake reviews to ensure that the policy can continue to provide the chosen level of cover. They will look at a number of different factors such as the size of the investment pot, current mortality rates and investment performance. If they decide the policy isn’t sustainable at its current premium, the consumer will usually be offered the option of increasing the premium. This is what led to the changes proposed at the 2020 policy review. Having undertaken the review, Aviva’s assumptions were that the policy was unsustainable on its existing terms, and a higher level of premium was needed to maintain the policy’s sum assured. This would undoubtedly have come as a surprise to Mr and Mrs T as there hadn’t ever been any

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previous indication from reviews that the policy might need significant changes. But I don’t find Aviva at fault in this respect. I’ve gone on to consider the communications given relating to the reviews that have taken place on the policy. In making this decision, I’ve taken into account the following standards: • The FCA’s Principles for Businesses, in particular Principle 6 and Principle 7; • The FCA’s Conduct of Business Sourcebook (COBS), in particular COBS 2.1.1R(1) and COBS 4.2.1R(1) • The FCA’s Final guidance on the “Fair treatment of long-standing customers in the life insurance sector” (FG16/8). With these standards in mind, I think that Aviva ought to have provided Mr and Mrs T with clear, fair and not misleading information about the policy. What I’ve drawn from the guidance is that the communications to Mr and Mrs T should have included key details about the policy such as its performance, the value of its underlying fund and any fees and charges that had been applied. And it should have provided this information within a reasonable time frame of when the costs of the policy overtook the premiums being paid in. This policy was scheduled for its first review, ten years after commencement, in 2005, and then regularly after that (every five years). Aviva has provided a copy of the 2005 review and this states it was able to guarantee life cover at the current level until the next policy review and there was no need to increase the premium. The policy should have next been reviewed in 2010 and then again in 2015. As Aviva hasn’t provided details of any communications given at the time these reviews should have taken place, it hasn’t been able to show how it met its obligations in terms of information up to this point. But it has confirmed these two reviews were both run as part of a project looking at policies with missed reviews. The outcome of both reviews was that they passed and no action was required. This meant that the fund value and existing premium was sufficient to maintain the benefits up to the next review date in 2015 and 2020 respectively. From the 2020 review communication I’ve seen, Aviva did provide detailed information about the performance of the policy. This made clear the policy had failed a review, and options were given to reduce the cover and keep the premium the same or increase the premium so the original level of cover could be maintained. There was information to explain the policy had only been reviewed until the next review date, and any changes will only be guaranteed until the review due in 2025, after which point a further change will almost certainly need to be made and further action is likely to need to be taken at every future review. The was also projections given based on assumed growth for how long Aviva expected the policy to be able to maintain the cover if both changes were made and if they were not. But in giving this amount of information, this was the point at which Mr and Mrs T complained. As previously noted, Aviva hasn’t been able to provide any information relating to two of the earlier reviews, so I can’t be sure that it did meet all of Mr and Mrs T’s information needs. This is particularly relevant as it has provided information to indicate the point at which the cost of providing the life cover had exceeded the premium being paid on this policy was between the scheduled 2010 and 2015 reviews. So I find there was a failure to communicate in a clear, fair and not misleading way. Despite my concerns that Aviva has failed to show it provided sufficient information to Mr and Mrs T as part of the earlier reviews, I don’t think providing clear information sooner would have led them to taking different action. I’ll explain why. Mr and Mrs T’s submissions indicate they valued the life cover and still wanted it when they understood it would provide the existing sum assured of just under £58,000. Their

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circumstances meant that the cover continued to be of great value to them even after repaying their mortgage. So, it does appear they wanted and needed cover throughout the time they held the policy, and they were happy to pay the required premium of around £27 per month for cover of nearly £60,000. The point at which they started to question this was when they were told at the 2020 review, the premium could no longer maintain the cover. Despite this they did reluctantly increase the premiums, albeit raising a complaint around the same time. I also note they didn’t seek to surrender the policy at this point. And they have been clear in their submissions that they had absolutely no intention of terminating the product, which is why they continued to pay. If they were given clear information at the 2015 review about the cost of the policy and potential future need for changes, I think it most likely they would have decided to keep the premiums at the current level when the expected cover was still available, rather than take different action. It doesn’t seem they wanted to contribute more to the policy. And while the same cover was still being provided, I’m not persuaded that they would have sought to surrender the policy sooner. While they did increase the premiums in 2020, it is clear from their submissions that paying more for the policy isn’t something they are comfortable doing now, let alone in 2015. So, I’m not persuaded they would have sought to make significant changes to the policy in 2015, even if they had been given information about the cost of providing the cover exceeding the premiums. So, taking this all into account, I don’t think it’s likely Mr and Mrs T would have made any changes to the policy or surrendered it even if they had been provided with sufficient information earlier. Lastly, I note that Aviva has offered Mr and Mrs T compensation after it admitted errors with it not providing the 2010 and 2015 reviews. It says it will pay them £300 for the inconvenience suffered as a result. Finding out these reviews were not completed as required, has caused them upset. Having considered this offer, I’m satisfied it is fair and reasonable in the circumstances. So, I find that Aviva should pay this compensation to Mr and Mrs T. I realise this will come as a disappointment to Mr and Mrs T, but I don’t find Aviva needs to do anything further beyond this. My final decision Aviva Life & Pensions UK Limited has already made an offer to pay £300 to settle the complaint and I think this offer is fair in all the circumstances. So my final decision is that Aviva Life & Pensions UK Limited should pay (if it hasn’t already) the £300 it offered to settle the complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs T to accept or reject my decision before 3 April 2026. Daniel Little Ombudsman

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