Life Insurance UK
A discussion of the regulatory environment in which life policies are sold.
Despite having the same name, when buying life insurance UK customers need to know that different types of policy are regulated in different ways; and if you are dissatisfied with a product or its performance, your forms of redress can vary widely.
It’s quite important that you understand your legal position when dealing with financial products. Most people think the Financial Services Authority (FSA) keep an eye on all financial transactions… but they don’t. When you buy life insurance UK protective measures come largely from the Financial Services and Markets Act 2000 (FSMA), which protects investments. Yes, that’s investments not insurances!
Now, most long-term whole-of-life policies count as investments; as they have an investment component (if you surrender such a policy, it has an intrinsic value), and if you feel that your life company has mistreated you in some way, you have recourse to the FSA. The same protection extends to long-term (or convertible) term contracts.
But when buying life insurance UK customers need to know that term contracts which satisfy all the following criteria (often the easiest ones to obtain) are not regulated by the FSA:
- Benefits are only payable on death or incapacity
- Benefits only payable on death within a maximum 10 years (and in any case before age 70)
- Contract has no surrender value, and is not convertible into a contract with surrender value
Most short-term term assurance products fall into this category, and you need to be aware that your rights are therefore correspondingly reduced.