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As Featured on NewsNow

Norwich Union life insurance pulls out of whole-of-life market

The Financial Services Authority (FSA) has warned consumers to be cautious about rushing into signing up for whole-of-life insurance policies after seeing a surge in complaints from customers who were mis-sold policies.

Financial ombudsman Walter Merricks, received 5,442 complaints about mis-sold policies last year, with consumers winning compensation in around half the disputes, the Sunday Herald newspaper reports.

The main source of dissatisfaction relates to unit-linked policies, a niche product which was invented in the mid-1980s and sold aggressively by insurance sales forces during the following decade.

At that time they were hailed as a solution for protecting families in early life, while also offering protection against inheritance tax in old age. However, many experts believed that, in reality, they offered poor value.

A number of companies, including Norwich Union, Standard Life, Aegon UK and Legal & General have now pulled out of the market.

Ombudsman spokesman, David Cresswell, said: "There are a range of problems with these policies, and we are worried about the way they are being specifically targeted at the elderly through day-time TV.

"Worries about funeral expenses start to prey on their minds. This can lead to them signing up for premiums which they may not be able to afford on very limited incomes."