ReAssure Life Limited · DRN-6195497

The complaint Mr M complains about the way ReAssure Life Limited administered his reviewable whole of life policy (RWOL). What happened Mr M took out the RWOL policy in 1998, on advice by an independent financial adviser, for the purpose of having critical illness cover. He agreed to an automatic inflation increase option – this would essentially mean yearly increases in the sum assured to keep pace with inflation. The policy was a Skandia policy, subsequently administered by Old Mutual Wealth and now ReAssure. Over the years, Old Mutual Wealth wrote to Mr M with review letters explaining his options to increase the sum assured in line with inflation. He did not receive any statements or detailed reviews of his policy until 2016. In 2017, following a second yearly statement, Mr M’s financial advisers made enquiries to reduce Mr M’s contributions. By this point, he was paying £2,599 per month for cover worth £1,189,804. Shortly after this, Mr M cancelled his direct debit and the policy was made paid up in April 2017. By July 2017, the fund was entirely depleted and the policy was cancelled. Mr M complained about Old Mutual Wealth’s management of the policy – specifically the level of charges, the failure to apply automatic increases, the failure of the policy to build a meaningful investment pot as well as what he claimed were disproportionate increases in his premium as well as the costs of life cover. ReAssure looked into his complaint, but didn’t think it had done anything wrong. It said it had reviewed the charges, premiums and reviews of Mr M’s policy and concluded that he had paid the correct amounts. It acknowledged the issues pre 2008 with some of the automatic increases, but said it put that right in the letter it sent to him in 2008 – and in any event, those automatic increases, had they taken place, would’ve increased his premiums even more. It said that the terms were clear about what would happen in the event that premiums stopped being paid and Mr M was given ample warning at the time. There was substantial correspondence between the parties, but Mr M remained unhappy with the responses from ReAssure and referred his complaint to this service. One of our investigators looked into his complaint but didn’t think it should be upheld. As Mr M disagreed with the investigator, the matter was passed to me to decide. I issued a provisional decision. In it I said: I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I should start by saying that Mr M’s representative has provided very detailed submissions on Mr M’s complaint and in response to the investigator’s initial assessment. I understand that he profoundly disagrees with the investigator’s approach and considers Mr M’s complaint ought to be upheld. Although I’ve only summarised Mr M’s comments in response to the investigator’s assessment, I can confirm that I’ve read and considered all of his

-- 1 of 12 --

submissions very carefully. However, I hope he doesn’t take it as a discourtesy that I won’t be replying to all the points he has raised. The purpose of this decision is to explain my findings and my reasons – and to focus on the key areas in dispute. A number of Mr M’s comments, for example, relate to the failure to apply the automatic 10% increase in various years. But I can’t see that this is key to resolving Mr M’s complaint – if those increases had applied, they would’ve made the policy even less sustainable than it already was. Furthermore, if Mr M wanted the cover to increase, he always had the option of contacting Old Mutual Wealth, throughout the relevant period, to ask it to increase his cover – so I can’t see that Old Mutual Wealth not providing the 10% increase, whatever the specific reasons (which appear to be a combination of mistakes as well as a deliberate policy not to increase premiums by more than 25% in one go), is key to resolving this complaint. As such, and given the lack of information and the little likelihood of more comprehensive explanations as to what happened, I’m not persuaded there’s more I can add to what Mr M has already been told by the investigator and Old Mutual Wealth on this issue. On the same note, I’m also not persuaded it would be proportionate, reasonable or key to resolving this complaint to provide Mr M with the bid and offer prices, over such a long period, for the fund his policy was invested in. I say this primarily because that information wouldn’t take the complaint any further – it’s self-evident that the performance of the underlying fund isn’t something Old Mutual Wealth or ReAssure had any direct control over, and it’s clear to me that the bid / offer prices won’t tell Mr M anything about his policy or why it became so expensive. Equally, Mr M has raised a number of concerns about the charges being levied. I address some of those concerns below. But in relation to the life cover charges and how Old Mutual Wealth calculated those, I’m sorry that here too I’m not persuaded I can reach the conclusions Mr M is asking me to reach. I’ve seen insufficient evidence to persuade me that Old Mutual’s life cover charges were anything other than it putting a price on the risk it was taking by providing Mr M with life cover. It was entitled to put a price on that risk, and that process was carried out by professionals, themselves regulated, following a typical industry process. It isn’t my role to question Old Mutual Wealth’s legitimate commercial practices, or the prices it decided to put on the risks it was taking when providing life cover to clients. Mr M’s requests that this service ought to employ actuaries to go through the various charges, over multiple decades, to determine if anything has gone wrong, are neither reasonable nor proportionate in my view. Furthermore, they are not the way this service operates. Instead, I’ve considered all the information Mr M and ReAssure has provided as part of this complaint, to reach my own conclusions. The process Mr M appears to be describing would be a court process – and if he rejects my final decision or decides to withdraw his complaint, he will be free to pursue ReAssure via the courts. The key question, in my view, is whether Mr M would’ve done anything differently had he received more information from Old Mutual Wealth at relevant times. Taking everything into account, I think he would have and I explain why below. It’s important that I highlight here that I’ve reached my conclusions based on a careful assessment of Mr M’s circumstances, his submissions, his actions, his overall reasons for having the policy as well as the specific policy he had in place and what happened to it. In other words, my findings here apply specifically to the particular circumstances of Mr M’s case. They are not findings that are intended to apply to any other case or that set any form of precedent. Mr M’s representative has raised many concerns with the level of charges that have applied

-- 2 of 12 --

to the policy. In the main, I think some of his concerns have omitted to consider the fact that Old Mutual Wealth and ReAssure have been on risk throughout the life of the policy – so that, if there had been a claim during the relevant period, the firms would’ve needed to pay out what became a very substantial lump sum. Furthermore, for the type and level of cover Mr M had, it’s clear to me that during the time period in question, he would not have been able to find a cheaper alternative. It’s also important to highlight that this was an advised sale – and despite some of Mr M’s submissions, the onus on ensuring that Mr M fully understood and accepted the key features of the policy from the outset rested with his adviser at the time. However, that isn’t the end of the matter. Old Mutual Wealth had obligations at the time – obligations that existed even before the FCA’s 2016 guidance (which, I must add, specifically said that it was not introducing new rules but merely restating the existing regulatory position). These obligations included ensuring its communications were fair, clear and not misleading and ensuring it acted in Mr M’s best interests at all times. This means that even though Mr M’s adviser ought to have explained certain matters to him in more depth, for example the “setting up charge”, Old Mutual Wealth had an ongoing obligation to ensure that Mr M was aware of what he was paying, how much and why. I think this is especially important given the explanations that I’ve been given about the setting up charge – particularly the fact that it can change over the course of the policy and is based on a number of actuarial assumptions, it isn’t a set figure or percentage. This means that Mr M had no way of knowing, after he initially took out the policy, how much this charge was or when it was applied. His adviser couldn’t have known this at the point of sale (although he should’ve explained that it would apply each time the premium or sum assured was increased). The only party that knew how much the charge was and when it would be deducted was Old Mutual Wealth. And it never disclosed this information to Mr M. The statement he received in 2016 explained when this charge applied, but it still didn’t set it out in monetary figures. None of the reviews Mr M received set out the fact that an additional charge would apply every time he increased the cover or his premiums – and of course none of those letters set out, in monetary terms, what that charge amounted to. In my view, this was clearly not consistent with the overall regulatory framework that Old Mutual Wealth was required to comply with. I can see no fair and reasonable explanation for not providing Mr M with key information about the charges that applied to his policy – especially information that went to the heart of the policy’s financial viability and sustainability given the impact these charges had on the value of the underlying fund. The setting up charge, in particular, seems to have had a very significant impact on the value of the policy. By the time the policy lapsed in 2017, Mr M had paid over £33,000 in “setting up charges” in less than 20 years since the inception of the policy. At various times the individual charge deducted from the policy was 1.5% of the value of the cover, up to 5.3% of it in 2009. It's important that I highlight that the setting up charge was just one of the deductions that applied to the policy – and the only one that Mr M could’ve actually avoided (after setting up the policy) simply by not increasing his premium and cover as often as he did. The life cover charges, admin charges, fund management charges and bid offer spread were all deductions to his policy – and as above, none of these were made clear to Mr M at any point prior to 2016.

-- 3 of 12 --

It isn’t my role to question Old Mutual Wealth’s charges or second guess how it decided them. As I’ve said above, I also agree that the sale was not its responsibility and Mr M’s adviser ought to have been satisfied that he was recommending the right product for Mr M, taking into account the likely costs. However, I’m persuaded by Mr M that if he’d known earlier that his policy would be set up in this way, he would’ve given serious consideration to whether it was worthwhile him keeping it. I say this bearing in mind that he let the policy lapse, without value, once he was told by how much he’d need to reduce the cover in order to also reduce his premiums. This information was combined with the annual statement from 2016 which gave him clearer information about the deductions to his policy. The question, however, is when Mr M would’ve made this decision. Old Mutual Wealth ought to have been writing to him regularly – so it’s clear there are multiple points between 1998 and 2017 when Mr M should’ve been told about the charges on his policy and therefore when he might’ve made the decision to do something else. However, in my view, a key moment in the life cycle of the policy was Old Mutual Wealth’s letter from 2008, in which it explained to Mr M the errors that had occurred in applying the automatic inflation increase to his cover. In my view this was a significant moment. Firstly because the firm proactively wrote to Mr M to notify him of the error and what it was proposing to put it right. But at this moment in time, ten years from the inception of the policy, it also should’ve told him: • He’d paid £44,460 in premiums; • The surrender value was negligible; • Life cover charges at the time were already close to his monthly premium; • Given the automatic inflation option and the application of the set-up charge each time the cover and premium were increased, he’d already paid over £16,753 in setting up charges since he first took the policy out. I’m persuaded this information would’ve given Mr M significant cause to reassess his options. I say this in part because the setting up charge would’ve come as a shock given his understanding of when that charge would apply and how much it would be. It was a significant proportion of the premiums he was paying and one of the main reasons why the fund itself had not been built up. For example, in the policy year 2007 to 2008, Mr M paid £8,385 in premiums. From the statement, it looks like in that year he paid £5,921 in life cover charges1. But since he paid on 1 June 2008 over £2,366 in setting up charges, he essentially was not contributing anything to the underlying fund – and this was only ten years from inception and he was in his 50s, exactly the time period during which the policy was supposed to be building up an investment pot. What all this means is that 2008 was a key moment in the policy’s life cycle – it was an opportunity for Mr M to see that his policy had not worked as intended and had not built up 1 The statement shows units being sold, but not the actual charge – I’ve therefore only added the charges that are itemised – however it’s likely the life cover charges were higher than this in 2007/2008.

-- 4 of 12 --

any fund value capable of sustaining the policy later on in life. He would’ve seen from the information Old Mutual Wealth should’ve provided that the charges were increasing year on year, in addition to the various other deductions, and this would only get worse as he grew older. At this point, it’s clear to me that Mr M would’ve had a number of options available to him. He could’ve chosen to switch off the automatic inflation option, increase his contributions or reduced the sum assured. He could also have chosen to surrender the policy and look for alternatives. In my view, based on the evidence available as well as Mr M’s actions and submissions, he would’ve chosen to surrender his policy at that point in time. I say this because it would’ve been obvious to him that the policy was not working as he intended and that it would not build up the investment pot needed to help sustain the policy in later years when life cover charges increased. This is a key aspect of his complaint. I think it’s also clear that Mr M did not know or understand how much the various charges were impacting the performance of his policy – and had he seen this in 2008, I’m persuaded he would not have wanted to continue with this particular policy. I can’t say what alternatives Mr M would’ve had available at that time because there’s insufficient evidence. I’m persuaded Mr M had a protection need and would likely have still wanted a policy in place – but I’m satisfied this particular policy was not working the way he wanted nor was it reasonably going to last the rest of his life as was his intention. So to put matters right, I’m satisfied ReAssure ought to treat Mr M’s policy as if he’d surrendered it in 2008, shortly after its letter to him notifying him of the errors in previous years. For simplicity, it can assume this would’ve happen on the last day of the policy year. This means that ReAssure ought to pay Mr M any surrender value from that time, if there was one, plus 8% per year simple interest. But it also ought to refund the premiums he paid between 2008 and 2017 (adding 8% per year simple interest on those sums, from when they were paid until the settlement date). This is because he paid money towards a policy that he thought was building up to support him in later years and provide the payable benefit when he’d need it most. Instead, unbeknown to him, the policy was becoming more and more expensive, and the premium increases were only enough to keep the policy going from year to year, not to build up the investment pot required to plug any shortfall between premiums and charges in later years. A significant proportion of these premiums was being used to pay the setting up charge every time his sum assured was increased, and I’m persuaded Mr M was not aware that his premiums were being used in this way. I’ve considered the information Mr M was given during this time, and I’m not persuaded it was anywhere clear enough to indicate to him that the policy was in such a precarious position. I acknowledge a small fund was built up by 2017 – around £6,900. But since the monthly cover charges, by that point, were in excess of £2,200, the fund represented a small pot relative to the overall charges that applied to the policy and the premium Mr M was already paying. In refunding Mr M’s premiums during that period, I’ve taken into account the fact that Mr M did receive the relevant protection under the policy for the period in question – and at times, the sum at risk was very significant. In other words, his premiums did provide some benefit. But as a result of the charges that applied to this particular policy, as well as the lack of information provided to Mr M, I’m satisfied Mr M would not have wanted to continue with this policy – but would likely have looked for alternatives, which may have been more or less financially beneficial. So whilst I’ve taken into account the benefit he received under the

-- 5 of 12 --

policy, I’m not persuaded it would be fair and reasonable, in the particular circumstances of this case, to leave Mr M without the premiums he paid and the fact that he was deprived of the opportunity to seek alternatives due to the limited information he was given at relevant times. Whatever alternatives he is now able to secure will almost certainly cost more – assuming it is still possible for him to take out a policy for a similar value. So I don’t think it would be fair to leave Mr M with no compensation and no acceptable policy, and allow ReAssure to keep the premiums Mr M paid when its management of the policy and the way it communicated with Mr M for many years was so far below the relevant standards and directly impacted the choices Mr M could make. I also think Mr M is entitled to some compensation for the distress and inconvenience the matter has caused him. I think the sheer amount of money he paid in charges unrelated to his actual life cover came as a shock to him, as well as the fact that almost 20 years after taking out the policy there was almost no fund value left to sustain it. I can understand how upsetting it would’ve been in 2017 to see his policy lapse without value after only a few short months. Given the circumstances, I’m satisfied ReAssure ought to pay Mr M £500 compensation for the distress and inconvenience the matter has caused him.” Responses to my provisional decision ReAssure didn’t agree with my provisional findings. In summary, it said • There was no evidence that the policy had been taken out for IHT purposes – the only evidence available showed that Mr M had sought Critical Illness cover. It said that if this was the case, the structure of the policy was “inconsistent” with typical IHT planning because of it being set up on a maximum cover basis. • It didn’t agree with the categorisation of Mr M receiving “some benefit” given that the policy provided the full protection that he had sought. • It didn’t agree Mr M would’ve been shocked by the charges or by the lack of meaningful fund value. It said that RWOL policies were not designed to accumulate significant investment value, particularly where Critical Illness cover and Waiver benefits were included. These features increased the cost of insurance and the original illustration clearly showed minimum fund value build-up. • I should’ve fully considered the fact that Mr M had an adviser throughout the period who accepted premium increases on Mr M’s behalf and never raised concerns about sustainability, charges or fund value. He held the regulatory responsibility for ensuring its suitability and explaining all charges. • It didn’t agree Mr M would’ve surrendered the policy. It said that Mr M had confirmed he did not read his communications and his adviser “likewise did not act on them”. It said there was no “reasonable foundation for assuming that differently worded or differently presented communications would have altered behaviour”. It said the evidence “strongly suggests the opposite”. • It didn’t agree with the with my decision to award a full refund of premiums since I had acknowledged that Mr M would have remained on risk and would not have been able to obtain cheaper comparable cover elsewhere. Mr M also did not agree with my provisional decision, and provided detailed comments that I’ve summarised. He also provided a copy of an “actuarial report” produced using AI:

-- 6 of 12 --

• Mr M agreed with my conclusions in relation to the communications but said I had failed to fully consider the implications for the policy. I had wrongly speculated on what Mr M would’ve done and how he would’ve acted. • Mr M reiterated his concern that the increases in line with indexation had not been applied in some years leading to, by his calculations, a shortfall in the value of cover of £478,174. • He didn’t agree with my conclusions about OMW’s life cover charges and that instead I ought to have sought evidence and independently verified how premium increases were reached, including actuarial input, pricing assumptions and internal governance material. • He didn’t agree that there weren’t cheaper alternatives – he said the rates offered by OMW in 2016 were “relatively much lower” compared to what he was paying at the time. • He disagreed that he would’ve surrendered the policy. He said instead, he would’ve picked up on the errors in the cost of life cover and the matter would’ve been resolved then. • I did not offer proper reasons for why the majority of the complaint had not been upheld. Under the FCA handbook I was required to give reasons and did not do so adequately. • He reiterated his complaint points about the 10% increases not being applied in accordance with the policy, the level of charges being “erroneous and outrageously excessive” and not in line with what was presented in the Key Features Document. Further, he said the increases in premiums were “erroneous and disproportionate” to the increases in cover and the effect was “exorbitant annual increases in premiums”. • In 2016 concerns were raised about the “disproportionate increases in the premiums” – but OMW let the policy lapse without value despite the fact that dialogue was still continuing with Mr M. He said that in 2016 instead of “encouraging” Mr M to close his existing policy and switch to a new one, OMW should’ve been upfront about its “errors” and “properly disclosed the impact of the errors on the policy”. Had it done so, the policy could’ve continued because Mr M could’ve afforded the premiums. • Mr M repeated his calculation of the “undetected and unrectified errors on the policy” amounted to £478,174 less cover than he should’ve been enjoying by 2016. Mr M summarised a number of his concerns about the investigation and set out the next steps he considered I ought to take in order to properly address the complaint. He concluded that he disagreed with my provisional conclusions and instead ought to have concluded that Mr M was “deprived of making a legitimate claim of over £1.6m in 2018 and also deprived of the benefit of that money since then. • In summary he said that my primary purpose was to put Mr M back in the financial position he would’ve been in had the “mistake of unfair treatment not occurred”. Mr M says that he would’ve been able to make a claim of over £1.6m (what the policy would’ve been worth had all 10% increases been applied) on the policy in 2018 had the errors not occurred, or had they been rectified properly, commissions reinvested as intended, excessive undisclosed charges not deducted and full cover credited. I’ve therefore reconsidered the case in light of the submissions that have been made.

-- 7 of 12 --

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’d like to thank both parties for their detailed submissions, which I’ve carefully reviewed and considered in light of my provisional findings. Having done so, I’ve not been persuaded to change my provisional findings and therefore confirm them as final. In this final decision, I will explain my reasons why – but I will not necessarily be addressing each point or submission that’s been made. Instead, I will focus on what I consider to be the key issues in dispute. First of all, despite what Mr M has said, I’m not persuaded it would be fair and reasonable for me to set or tell ReAssure what price it should have put on the risk it was taking by providing Mr M with life and critical illness cover. If there was evidence that ReAssure had mistakenly overcharged him or had otherwise made any other mistake in the charges it deducted from the policy, then it would be fair for me to look at that and decide what ReAssure would need to do to put things right. But that isn’t the case here. There’s no evidence that ReAssure has made any mistakes in the way it charged the policy – and I accept ReAssure’s submissions, in that regard, that it has asked its actuarial department to review the way Mr M’s policy was charged and it conclusions that no errors were made. The submissions Mr M has provided on ReAssure’s charges are not evidence that it has made mistakes – they are assertions about what Mr M considers ReAssure should’ve charged, based on his own assessment. As I already explained in my provisional decision, the process by which ReAssure decides how much to charge for the life cover it provides is one which ReAssure was entitled to follow in accordance with its own commercial discretion – and whilst Mr M has provided alternative facts and figures demonstrating how he thinks the policy should’ve been priced (and consequently what he thinks his premiums should’ve been), I’m not persuaded that this is sufficient for me to ask ReAssure to, essentially, reprice the policy. None of that information (including the spreadsheet Mr M has provided) is evidence that the prices ReAssure was charging were incorrectly derived at – they simply highlight Mr M’s view of how much he thinks the policy should’ve been charged. But ReAssure (and the firms before it) had its own method and policy for setting these charges and it was entitled to price these policies consistent with its own commercial priorities and its own view of the risk it was taking as well as the wider market. I’m not persuaded it would be fair and reasonable, in the particular circumstances of this case, for me to interfere with or question ReAssure’s commercial practices in deciding the life cover charges that applied to Mr M’s policy. I’ve considered Mr M’s “actuarial report” produced with AI – I’m sorry to disappoint Mr M, but I don’t agree that this is the same as an independent report by a qualified actuary. But I’m also not persuaded that the report’s conclusions help Mr M’s case or make any difference to my findings. Old Mutual Wealth employed its own actuaries to decide on what price to put on the risk it was taking with the life cover it was providing Mr M – and those actuaries will have taken into account Old Mutual Wealth’s commercial priorities, as well as its own claims experience and other confidential data when deciding the relevant mortality charges. ReAssure has already explained this to Mr M on a number of occasions. None of that is featured, or could’ve featured, in the report Mr M produced. Much of the report simply makes assertions – for instance, where it concludes that in 2006 the magnitude of the premium increase is “broadly proportionate to the compounded” increase in cover that

-- 8 of 12 --

should’ve occurred between 2004 and 2006, but didn’t. And so, according to the report, this “strongly” suggested that the increase in 2006 was calculated “as though the missed 10% increases had been applied”. But the report makes no reference to any evidence to support this conclusion other than this arguable correlation, and, furthermore, the conclusion is flawed – at no point does it consider the actual costs of cover and by how much they increased during those years. This is an important element in ReAssure’s determination of how much the premium should be. In the section where the report deals with the cost of life cover, it simply asserts that the “life cover cost rises materially faster than recorded cover movements” – it doesn’t produce any evidence or highlight any inherent reason that means that the life cover was erroneously calculated by ReAssure. It doesn’t address the fact that life cover costs rise for any number of different reasons, even when the amount of life cover itself hasn’t changed. The circumstances when such changes happen have already been explained to Mr M numerous times. The rest of the report then takes it as a given that mistakes were made in the way the premiums and costs of life cover were calculated and determines the impact on the policy – concluding that a “full actuarial reconstruction” needed to be done. But I don’t agree that’s fair and reasonable. ReAssure has consistently explained that it has reviewed Mr M’s policy and the charges applied and found no errors were made. It doesn’t have to disclose what its formula is for establishing the life cover costs – and it has explained, at various points during the life of this complaint, that it has investigated the charges and the reviews. I’m satisfied by that explanation – and the submissions Mr M has made are not, in my view, persuasive evidence that anything has gone wrong in the pricing of the policy. Furthermore, whilst Mr M doesn’t agree, I’m satisfied he’s had an explanation from ReAssure about how the cost of cover was set and reassurance that no mistakes were made. It told him that “the cost of cover is based on the clients age, gender and any health and lifestyle information we received when they applied for the plan, and the difference between the amount of cover and the fund value they have built up”. The formula for how those factors translate into a charge isn’t something that I consider it fair and reasonable to question – it falls squarely within its commercial discretion. It has also explained, at various points, that the 10% increase in cover may require a greater increase in premium. The application form for when Mr M took out the policy said: “Under the Automatic Inflation Option, the Sum Assured will be increased automatically each year by the greater of 10% and the rate of inflation as measured by the Retail Prices Index. The increase in contribution will not necessarily be proportionate to the increase in the Sum Assured”. A review letter from 2006 explained that “as the cost of cover increases with age, it is possible that a 10% increase in sum assured will require an increase in contribution of more than 10%”. This all undermines the conclusions, in Mr M’s report, that there were errors in the way the life cover charges were calculated given the increases between 2004 and 2006 – it’s clear that any number of factors will have influenced the rise in life cover charges between those years. So Mr M has known from the start that there wouldn’t necessarily be an exact correlation between the increases in cover and the premiums – therefore, I don’t agree that where those

-- 9 of 12 --

premiums did increase by more than 10%, this means errors were made. And, as I’ve explained, the increase in cover is only one element – Mr M’s policy was reviewable in nature and, consequently, premiums might need to be increased regardless of whether the cover in place was also increased. This brings me to what I consider the key aspect of this complaint. Mr M’s submissions essentially require me to conclude that by June 2018, when Mr M was diagnosed with a critical illness that met the definitions under the policy, the policy would still have been in place and Mr M’s claim would therefore have been accepted – and the policy would’ve paid out. But as I’ve said, I’m not persuaded there were errors in the life cover charges applied and consequently in the premiums Mr M was required to pay. Furthermore, Mr M had the option of continuing the policy in 2017 if he wanted to – he didn’t have to let it lapse. That letter set out quite clearly how much extra he’d need to pay and for how long that would be enough to sustain the policy. He was also separately given alternatives with lower levels of cover and premiums, which he declined. Pausing here – it’s important to highlight that comparing the premiums for each alternative per £1000 of cover is not an appropriate way to compare. It’s clear that the higher the cover being provided, the more expensive the policy becomes – it isn’t all priced at the same way per £1000 of cover. So when I said in my provisional decision that Mr M would likely have been unable to find a cheaper policy elsewhere, I was referring to another policy with the same level of cover. The alternatives Mr M was offered in 2017, may well have been cheaper per £1000 of cover, but the life cover quoted was also much lower than what was in place at that moment in time. Taking everything into account, even if I accepted Mr M’s overall argument (which I need to be clear, I don’t), I’m not persuaded it would be fair and reasonable to allow Mr M to benefit from a policy he chose to let lapse, when he had opportunities to continue paying towards it and decided not to. Instead, what I do consider is clear from this case, is that ReAssure’s communications at the relevant times were not fair, clear and not misleading – and none of ReAssure’s comments in response to my provisional decision have persuaded me to change those findings. Regardless of Mr M’s purpose for taking out the policy to begin with, it’s clear to me that all of the relevant communications make clear that the intention of the policy was to build up a fund value – in some of the statements I’ve seen ReAssure said as much: “At the start of the plan, the cover costs less than the premium you pay, meaning a fund value can build up.” In 2018 ReAssure explained that “the fund value is the mechanism to allow a level premium to be paid as long as possible” and that in “the early years the premium exceeds the cover charges, which allows a fund value to build up”. I don’t dispute that the key features document gave an illustration which suggested a low fund value after ten years. But that same document also highlighted that these were just estimates. The point is that Mr M ought to have been told what the actual costs of his policy were – this is not about “differently worded” or “differently presented” communications. To categorise what I outlined in my provisional decision as failings in ReAssure’s communications in this way suggests that the letters had meaningful content but were simply not worded or presented clearly enough. But the letters did not contain key information about the policy at all. None of the review letters from that time gave Mr M information about his policy, other than indicating that he was entitled to an automatic increase or, as in 2008, that errors had previously been

-- 10 of 12 --

made and what was being proposed to put matters right. But even on that occasion, Mr M wasn’t told what charges were being deducted from his policy – and he was never told, at the time, how much the setting up charge was – or in fact any charge or deduction. And he couldn’t have worked it out himself – the application said that it was a percentage of the life cover but ReAssure has then said that this isn’t actually the case and it varies – the evidence from subsequent years shows that charge does in fact vary considerably and is neither a set sum nor a set percentage. In other words, a charge was being deducted from Mr M’s policy for initially setting it up, and then subsequently every time he amended his premium or life cover – but Mr M wasn’t told until 2017 how much that charge actually was. ReAssure has not provided any reason why it felt that not providing this information was in Mr M’s best interests or in line with his information needs – considering that, at relevant times, it also didn’t provide any other monetary information about the deductions being made to the policy. Furthermore, whilst I agree that Mr M’s adviser ought to have ensured Mr M knew and was aware of the charging structure of the policy at the outset, as I’ve said, this didn’t absolve ReAssure of its own responsibility for ensuring its communications were fair, clear and not misleading. And for the reasons I gave in my provisional decision, they weren’t. Without seeing the actual impact the charges were having on his policy, and in particular the setting up charge, Mr M would not have been able to know just how expensive the automatic increase was – and importantly, the significant effect it was having on the life cover costs and other charges that were being deducted from his policy. ReAssure has said that Mr M admitted he didn’t read the letters and his adviser didn’t act on them – but there was so little information in the letters themselves that it isn’t surprising to me that neither Mr M nor his adviser considered them in detail or thought they were important. They contained virtually no information about the policy. And in fact, when the further detail was provided in 2017, along with the review outcome, it prompted far more detailed inquiries about the policy and what was happening. Shortly after this, Mr M decided to let the policy lapse. This suggests, in my view strongly, that more comprehensive communications at an earlier stage would’ve allowed Mr M to make those inquiries and make an informed decision much earlier. The fact that, despite his need for the policy, Mr M allowed the policy to lapse in 2017 clearly indicates that this was something he would’ve considered earlier had he been in possession of all the information ReAssure ought to have been providing him. For these reasons, I remain of the view that in 2008 faced with a letter admitting mistakes to a key feature of the policy, as well as additional information around the charges (and therefore the setting up charge, which equated to over a third of the premiums he’d paid in by that point), Mr M would’ve realised that this policy was no longer right for him. And given his reaction in 2017, I’m satisfied that he would’ve decided to surrender the policy at that point. ReAssure has said it doesn’t agree with a full refund of premiums given that I’ve acknowledged Mr M would have remained on risk. That isn’t what I said. I said Mr M would’ve likely looked for alternatives – but I cannot say what those alternatives would’ve been, how much they would’ve cost (and therefore whether more or less than he was paying) and, crucially, those alternatives are very likely no longer available to him now. In my view, given the particular circumstances of Mr M’s case, a refund of premiums is the

-- 11 of 12 --

only way to ensure that Mr M is put as close as possible to the position he would now be in had ReAssure communicated with him fairly, clearly and not misleadingly. Mr M has made it clear he doesn’t agree with my findings. If that remains the case once he reads my final decision, he is entitled to reject the decision – this will ensure that it is not legally binding (and therefore no compensation is payable). He will then be able to pursue the matter via other avenues. Putting things right So to put matters right, I’m satisfied ReAssure ought to treat Mr M’s policy as if he’d surrendered it in 2008, shortly after its letter to him notifying him of the errors in previous years. For simplicity, it can assume this would’ve happened on the last day of the policy year. This means that ReAssure ought to pay Mr M any surrender value from that time, if there was one, plus 8% per year simple interest. But it also ought to refund the premiums he paid between 2008 and 2017 (adding 8% per year simple interest on those sums, from when they were paid until the settlement date). This is because he paid money towards a policy that he thought was building up to support him in later years and provide the payable benefit when he’d need it most. Instead, unbeknown to him, the policy was becoming more and more expensive, and the premium increases were only enough to keep the policy going from year to year. A significant proportion of these premiums was being used to pay the setting up charge every time his sum assured was increased, and I’m persuaded Mr M was not aware that his premiums were being used in this way. I’m also satisfied ReAssure ought to pay Mr M £500 compensation for the distress and inconvenience the matter has caused him. My final decision My final decision is that I uphold Mr M’s complaint and ReAssure Life Limited must pay the compensation I’ve set out above, to Mr M, within 28 days of when we tell it he has accepted this final decision. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 28 April 2026. Alessandro Pulzone Ombudsman

-- 12 of 12 --